ACCO Brands
Annual Report 2012

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 ___________________________________________________________Form 10-KANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934For the Fiscal Year Ended December 31, 2012¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE 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 36-2704017(State or Other Jurisdictionof Incorporation or Organization) (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:NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No 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 ¨ 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 of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes  No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File requiredto be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was requiredto submit and post such files). Yes  No ¨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 thebest of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K. ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (asdefined in Rule 12b-2 of the Exchange Act).Large accelerated filer  Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No As of June 30, 2012, the aggregate market value of the shares of Common Stock held by non-affiliates of the registrant was approximately $1.026 billion.As of February 1, 2013, the registrant had outstanding 113,193,057 shares of Common Stock.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant’s definitive proxy statement to be issued in connection with registrant’s annual stockholder’s meeting expected to be held onMay 7, 2013 are incorporated by reference into Part III of this report. Table of ContentsTABLE OF CONTENTS PART I ITEM 1.Business1ITEM 1A.Risk Factors8ITEM 1B.Unresolved Staff Comments15ITEM 2.Properties16ITEM 3.Legal Proceedings16ITEM 4.Mine Safety Disclosures17PART II ITEM 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities18ITEM 6.Selected Financial Data20ITEM 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations22ITEM 7A.Quantitative and Qualitative Disclosures About Market Risk44ITEM 8.Financial Statements and Supplementary Data46ITEM 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure91ITEM 9A.Controls and Procedures91ITEM 9B.Other Information91PART III ITEM 10.Directors, Executive Officers and Corporate Governance91ITEM 11.Executive Compensation91ITEM 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters92ITEM 13.Certain Relationships and Related Transactions, and Director Independence92ITEM 14.Principal Accountant Fees and Services92PART IV ITEM 15.Exhibits and Financial Statement Schedules93 Signatures99Table of ContentsPART ICautionary Statement Regarding Forward-Looking Statements. Certain statements made in this Annual Report on Form 10-K are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statementsto be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and areincluding this statement for purposes of invoking these safe harbor provisions. These forward-looking statements, which are based on certainassumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “will,” “believe,”“expect,” “intend,” “anticipate,” “estimate,” “forecast,” “project,” “plan,” or similar expressions. Our ability to predict results or the actual effectof future plans or strategies is inherently uncertain. Because actual results may differ from those predicted by such forward-looking statements, youshould not place undue reliance on such forward-looking statements when deciding whether to buy, sell or hold the Company’s securities. Weundertake no obligation to update these forward-looking statements in the future. The factors that could affect our results or cause plans, actions andresults to differ materially from current expectations are detailed in this report, including under “Item 1. Business,” “Item 1A. Risk Factors” and thefinancial statement line item discussions set forth in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results ofOperations” and from time to time in our other SEC filings.Website Access to Securities and Exchange Commission ReportsThe 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 reports filed orfurnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as practicable after the Company files them with, orfurnishes them to, the Securities and Exchange Commission. We also make available the following documents on our Internet website: the AuditCommittee Charter; the Compensation Committee Charter; the Corporate Governance and Nominating Committee Charter; our CorporateGovernance Principles; and our Code of Business Conduct and Ethics. The Company’s Code of Business Conduct and Ethics applies to all of ourdirectors, officers (including the Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer) and employees. You may obtaina copy of any of the foregoing documents, free of charge, if you submit a written request to ACCO Brands Corporation, 300 Tower Parkway,Lincolnshire, IL. 60069, Attn: Investor Relations. After April 16, 2013 please send all requests to ACCO Brands Corporation, Four CorporateDrive, Lake Zurich, IL 60047-2997, Attn: Investor Relations.ITEM 1. BUSINESSAs used in this Annual Report on Form 10-K for the fiscal year ended December 31, 2012, the terms "ACCO Brands," "ACCO", the "Company,""we" "us," and "our" refer to ACCO Brands Corporation and its consolidated domestic and international subsidiaries.OverviewACCO Brands is one of the world's largest suppliers of branded school and office products (excluding furniture, computers, printers and bulk paper).Approximately 80% of our net sales come from brands that occupy the number one or number two positions in the select markets in which we compete. Wesell our products through many channels that include the office products resale industry as well as through mass retail distribution and e-tailers. We design,develop, manufacture and market a wide variety of traditional and computer-related office products, school supplies and paper-based time managementproducts. Through a focus on research, marketing and innovation, we seek to develop new products that meet the needs of our consumers and commercialend-users, and support our brands. We compete through a balance of product innovation, category management, a low-cost operating model and an efficientsupply chain. We sell our products primarily to markets located in the United States, Northern Europe, Canada, Australia, Brazil and Mexico.Our office, school and calendar product lines use name brands such as AT-A-GLANCE®, Day-Timer®, Five Star®, GBC®, Hilroy®, Marbig, Mead®,NOBO, Quartet®, Rexel, Swingline®, Tilibra®, Wilson Jones® and many others. Our products and brands are not confined to one channel or productcategory and are designed based on end-user preference in each geographic location.The majority of our office products, such as stapling, binding and laminating equipment and related consumable supplies, shredders and whiteboards,are used by businesses. Most of these business end-users purchase their products from our customers, which include commercial contract stationers, retailsuperstores, mass merchandisers, wholesalers, resellers, mail order and internet catalogs, club stores and dealers. We also supply some of our productsdirectly to large commercial and industrial end-users. Historically, we have targeted the premium end of the product categories in which we compete. However,we also supply private label products for our customers and provide business machine maintenance and certain repair services.1Table of ContentsOur school products include notebooks, folders, decorative calendars, and stationery products. We distribute our school products primarily throughtraditional and online retail mass market, grocery, drug and office superstore channels. We also supply private label products within the school productssector. Our calendar products are sold throughout all channels where we sell office or school products, and we also sell direct to consumers.Our computer products group designs, distributes, markets and sells accessories for laptop and desktop computers, tablets and smartphones. Theseaccessories primarily include security products, iPad® covers and keypads, smartphone accessories, power adapters, input devices such as mice, laptopcomputer carrying cases, hubs, and docking stations and ergonomic devices. We sell these products mostly under the Kensington®, Microsaver® andClickSafe® brand names. All of our computer products are manufactured by third-party suppliers, principally in Asia, and are stored in and distributed fromour regional facilities. Our computer products are sold primarily to consumer electronics online retailers, information technology value-added resellers, originalequipment manufacturers and office products retailers.We believe our leading product positions provide the scale to enable us to invest in product innovation and drive growth across our product categories. Inaddition, the expertise we use to satisfy the exacting technical specifications of our more demanding commercial customers is in many instances the basis forexpanding our innovations to consumer products. We plan to grow via a strategy of organic growth supplemented by acquisitions that can leverage our existingbusiness.We utilize a combination of manufacturing and third-party sourcing to procure our products, depending on transportation costs, service needs and directlabor costs associated with each product. We currently manufacture approximately half of our products, and specify and source approximately half of ourproducts, mainly from Asia.Our priority for free cash flow over the near term is to fund the reduction of debt, invest in working capital to support organic growth and to invest innew products through both organic development and acquisitions.On May 1, 2012, we completed the merger ("Merger") of the Mead Consumer and Office Products Business (“Mead C&OP”) with a wholly-ownedsubsidiary of the Company. Accordingly, the results of Mead C&OP are included in our consolidated financial statements from the date of the Merger.On May 1, 2012, we entered into a refinancing in conjunction with the Merger. The refinancing transactions reduced our effective interest rates whileincreasing our borrowing capacity and extending the maturities of our credit facilities.For further information on the Merger with Mead C&OP and refinancing see Note 3, Acquisitions and Note 4 Long-term Debt and Short-termBorrowings, to the consolidated financial statements contained in Item 8 of this report.Reportable SegmentsACCO Brands is organized into three business segments: ACCO Brands North America, ACCO Brands International and Computer Products Group.During the second quarter of 2012, we implemented certain organizational changes in our business segments in conjunction with the Merger with MeadC&OP. Effective as of the second quarter of 2012, our former ACCO Brands Americas segment became ACCO Brands North America as our pre-acquisitionLatin America business was moved into the ACCO Brands International segment along with Mead C&OP's Brazilian operations. Our Computer ProductsGroup was unaffected by the realignment or the Merger.As discussed in Note 1, Basis of Presentation, to the consolidated financial statements contained in Item 8 of this report, during the second quarter of2011 we sold our GBC Fordigraph Pty Ltd (“GBC Fordigraph”) business which was formerly part of the ACCO Brands International segment and isincluded in the financial statement caption “Discontinued Operations.” The ACCO Brands International segment is now presented on a continuing operationsbasis excluding GBC Fordigraph.ACCO Brands North America and ACCO Brands InternationalACCO Brands North America and ACCO Brands International manufacture, source and sell traditional office products, school supplies, calendarproducts and document finishing solutions. ACCO Brands North America comprises the U.S. and Canada, and ACCO Brands International comprises therest of the world, principally Europe, Latin America, Australia, and Asia-Pacific.Our office, school and calendar product lines use name brands such as AT-A-GLANCE®, Day-Timer®, Five Star®, GBC®, Hilroy®, Marbig, Mead®,NOBO, Quartet®, Rexel, Swingline®, Tilibra®, Wilson Jones® and many others. Our products and brands are not confined to one channel or productcategory and are sold based on end-user preference in each geographic location.2Table of ContentsThe majority of our office products, such as stapling, binding and laminating equipment and related consumable supplies, shredders and whiteboards,are used by businesses. Most of these business end-users purchase their products from our customers, which include commercial contract stationers, massmerchandisers, retail superstores, wholesalers, resellers, mail order and internet catalogs, club stores and dealers. We also supply some of our productsdirectly to large commercial and industrial end-users. Historically, we have targeted the premium end of the product categories in which we compete. However,we also supply private label products for our customers and provide business machine maintenance and certain repair services.Our school products include notebooks, folders, decorative calendars, and stationery products. We distribute our school products primarily throughtraditional and online retail mass market, grocery, drug and office superstore channels. We also supply private label products within the school productssector. Our calendar products are sold throughout all channels where we sell office or school products, and we also sell direct to consumers.Computer Products GroupThe Computer Products Group designs, distributes, markets and sells accessories for laptop and desktop computers and tablets and smartphones.These accessories primarily include security products, iPad® covers and keypads, smartphone accessories, power adapters, input devices such as mice,laptop computer carrying cases, hubs, docking stations and ergonomic devices. The Computer Products Group sells mostly under the Kensington®,Microsaver® and ClickSafe® brand names, with the majority 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 distributed fromour regional facilities. Our computer products are sold primarily to consumer electronics retailers, information technology value-added resellers, originalequipment manufacturers and office products retailers.For further information on our business segments see Note 16, Information on Business Segments, to the consolidated financial statements containedin Item 8 of this report.Customers/CompetitionOur sales are generated principally in North America, Europe, Latin America and Australia. For the year ended December 31, 2012, these marketsrepresented 64%, 15%, 11% and 8% of net sales, respectively. Our top ten customers accounted for 53% of net sales for the year ended December 31, 2012.Sales to Staples, our largest customer, amounted to approximately 13% of consolidated net sales for each of the years ended 2012, 2011 and 2010. Sales to oursecond largest customer amounted to approximately 10% of consolidated net sales for each of the years ended 2011 and 2010. Sales to no other customerexceeded 10% of consolidated sales for any of the last three years.The customer base to which we sell our products is primarily made up of large global and regional resellers of our products. Mass and retail channelsmainly sell to individual consumers but also to small businesses. Office superstores primarily sell to commercial customers but also to individual consumersat their retail stores. As a result, there is no clear correlation between product, consumer or distribution channel. We also sell to commercial contract stationers,wholesalers, distributors, mail order and internet catalogs, and independent dealers. Over half of our product sales by our customers are to business end-users, who generally seek premium products that have added value or ease-of-use features and a reputation for reliability, performance and professionalappearance. Some of our document finishing products are sold directly to high-volume end-users and commercial reprographic centers. We also sell calendarproducts direct to consumers.Current trends among our customers include fostering high levels of competition among suppliers, demanding innovative new products and requiringsuppliers to maintain or reduce product prices and deliver products with shorter lead times and in smaller quantities. Other trends are for retailers to importgeneric products directly from foreign sources and sell those products, which compete with our products, under the customers' own private-label brands. Thecombination of these market influences, along with a recent and continuing trend of consolidation among resellers, has created an intensely competitiveenvironment in which our principal customers continuously evaluate which product suppliers they use. This results in pricing pressures, the need for strongerend-user brands, broader product penetration within categories, the ongoing introduction of innovative new products and continuing improvements incustomer service.Competitors of our ACCO Brands North America and ACCO Brands International segments include, 3M, Avery Dennison, Blue Sky, Carolina Pad,Dominion BlueLine, Esselte, Fellowes, Franklin Covey, Hamelin, House of Doolittle, Newell Rubbermaid, Smead, Spiral Binding, Tops Products andnumerous private label suppliers and importers. Competitors of the Computer Products Group include Belkin, Fellowes, Logitech and Targus.3Table of ContentsCertain financial information for each of our business segments and geographic regions is incorporated by reference to Note 16, Information onBusiness Segments, to the consolidated financial statements contained in Item 8 of this report.Product Development and Product Line RationalizationOur strong commitment to understanding our consumers and defining products that fulfill their needs drives our product development strategy, whichwe believe is and will continue to be a key contributor to our success in the office products industry. Our new products are developed from our own consumerunderstanding, our own research and development or through partnership initiatives with inventors and vendors. Costs related to consumer research andproduct research when paid directly by ACCO Brands are included in marketing costs and research and development expenses, respectively. Research anddevelopment expenses amounted to $20.8 million, $20.5 million and $24.0 million for the years ended December 31, 2012, 2011 and 2010, respectively.Significant product developments include the Computer Products Group's development of tablet and smartphone accessory products that represented33% of the group's 2012 segment revenue. In 2011 the Computer Products Group also launched a new proprietary computer security lock product under thebrand "ClickSafe®" to supplement its well recognized MicroSaver® product line for which most patent protection expired in January, 2012. The ClickSafesolution has patent protection through 2029.In 2012, ACCO Brands extended its award-winning, patented auto-feed shredding line to seven models with a shredding capacity from 60 sheets to 750sheets at a time. These models are sold globally under the Swingline and Rexel brands. We also redeveloped our global assortment of laminators, consolidatingfrom 14 machines to 9 machines and rebranding them as Swingline™ GBC® Fusion™ Laminators in the U.S. The new Fusion laminator line issignificantly faster in productivity compared to competitive products.In commercial channels, we have extended our presentation product range line to include a new line of environmentally friendly porcelain whiteboardsand notice boards which were launched in 2013 commercial catalogs. In retail channels, we introduced a range of Quartet® brand SKUs into Europe. We havealso extended our Swingline® brand fashion stapling platform to include a durable full-strip metal model, and launched a new lower-cost range of opening-price-point metal staplers and punches for the South African market.Also in 2012, ACCO Brands introduced a new product in the ergonomic category, the Conform Wrist Rest. This is the first wrist rest that lessenspressure on the user's carpel tunnel. Conform utilizes the proprietary SmartFit system to optimize the user's wrist angle.Our product line strategy emphasizes the divestiture of businesses and rationalization of product offerings that do not meet our long-term strategic goalsand objectives. We consistently review our businesses and product offerings, assess their strategic fit and seek opportunities to divest nonstrategic businesses.The criteria we use in assessing the strategic fit include: the ability to increase sales for the business; the ability to create strong, differentiated brands; theimportance of the business to key customers; the business relationship with existing product lines; the impact of the business to the market; and thebusiness's actual and potential impact on our operating performance.As a result of this review process, during 2011 we completed the sale of GBC Fordigraph, our former Australian direct sales business that sold mailroom and binding and laminating equipment and supplies. This business represented approximately $46 million in annual net sales for the year endedDecember 31, 2010. In addition, during 2009 we completed the sale of our former commercial print finishing business. This business representedapproximately $100 million in annual net sales for the year ended December 31, 2008.Raw MaterialsThe primary materials used in the manufacturing of many of our products are plastics, resin, polyester and polypropylene substrates, paper, steel,wood, aluminum, melamine, zinc 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 our customersrequire advance notice and negotiation to pass through raw material price increases, giving rise to a delay before cost increases can be passed on to ourcustomers. The raw materials and labor costs we incur are subject to price increases that could adversely affect our profitability. Based on experience, webelieve that adequate quantities of these materials will be available in the foreseeable future. In addition, a significant portion of the products we sell in ourinternational markets are sourced from China and other far Eastern countries and are paid for in U.S. dollars. Thus, movements of their local currency to theU.S. dollar have the same impacts as raw material price changes and we adjust our pricing in these markets to reflect these currency changes. See also Item1A, "Risk Factors".4Table of ContentsSupplyOur 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 customer-focused business model with a flexible supply chain to ensure that these factors areappropriately balanced. Using a combination of manufacturing and third-party sourcing also enables us to reduce our costs and effectively manage ourproduction assets by lowering capital investment and working capital requirements. Our strategy is to manufacture those products that would incur arelatively high freight and /or duty expense or have high service needs and source those products that have a high proportion of direct labor cost. Low-costsourcing mainly comes from China, but we also source from other Asian countries and Eastern Europe. Where freight costs or service issues are significant,we source from factories located in or near our domestic markets.SeasonalityOur 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: (1) 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 June, July, August and September for our North Americanbusiness and during November, December and January for our Australian and Brazilian businesses; and (2) our offering includes several products whichlend themselves to calendar year-end purchase timing, including AT-A-GLANCE® and Day-Timer® planners, paper organization and storage products(including bindery) and Kensington computer accessories, which has higher sales in the fourth-quarter driven by traditionally strong fourth-quarter sales ofpersonal computers, tablets and smartphones.Intellectual PropertyWe 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, even though there can be no assurance that the royalty income we currently receivepursuant to license agreements covering patents that will expire can be replaced, or that we will not experience a decline in gross profit margin on relatedproducts. Many of ACCO Brands' trademarks are only important in particular geographic markets or regions. Our principal registered trademarks are:ACCO®, AT-A-GLANCE®, ClickSafe®, Day-Timer®, Five Star®, GBC®, Hilroy®, Kensington®, Marbig, Mead®,MicroSaver® NOBO, Quartet®, Rexel,Swingline®, Tilibra®, and Wilson Jones®.Environmental MattersWe are subject to federal, state and local laws and regulations concerning the discharge of materials into the environment and the handling, disposal andclean-up of waste materials and otherwise relating to the protection of the environment. It is not possible to quantify with certainty the potential impact ofactions regarding environmental matters, particularly remediation and other compliance efforts that we may undertake in the future. In the opinion of ourmanagement, compliance with the present environmental protection laws, before taking into account estimated recoveries from third parties, will not have amaterial adverse effect upon our capital expenditures, financial condition, results of operations or competitive position. See also Item 1A, "Risk Factors".EmployeesAs of December 31, 2012, we had approximately 5,850 full-time and part-time employees. There have been no strikes or material labor disputes at anyof our facilities during the past five years. We consider our employee relations to be good.Discontinued OperationsAs of May 31, 2011, we disposed of GBC Fordigraph Pty Ltd (“GBC Fordigraph”). The Australia-based business was formerly part of the ACCOBrands International segment and the results of operations are included in the financial statements as a discontinued operation for all periods presented. GBCFordigraph represented $45.9 million in annual net sales for the year ended December 31, 2010. In 2011, we received net proceeds of $52.9 million andrecorded a gain on the sale of $41.9 million ($36.8 million after-tax).In June 2009, we completed the sale of our commercial print finishing business for final gross proceeds of $16.2 million. The results of operations andloss on sale of this business are reported in discontinued operations for all periods presented.5Table of ContentsFor further information on discontinued operations see Note 19, Discontinued Operations, to the consolidated financial statements contained in Item 8of this report.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 results ofoperations, see Part I, Item 1A—Risk Factors.6Table of ContentsExecutive Officers of the CompanyThe following sets forth certain information with regard to our executive officers as of February 22, 2013 (ages are as of December 31, 2012).Mark C. Anderson, age 50•2007 - present, Senior Vice President, Corporate Development•Joined the Company in 2007Boris Elisman, age 50•2010 - present, President and Chief Operating Officer•2008 - 2010, President, ACCO Brands Americas•2008 - 2008, President, Global Office Products Group•2004 - 2008, President, Computer Products Group•Joined the Company in 2004•Will succeed Robert J. Keller as Chief Executive Officer effectiveMarch 31, 2013 and will join the Company's Board of Directors onthat dateRobert J. Keller, age 59•2008 - present, Chairman and Chief Executive Officer•2004 - 2008, President and Chief Executive Officer, APACCustomer Services, Inc.•Joined the Company in 2008•On March 31, 2013, to be succeeded as Chief Executive Officer byBoris Elisman. Will remain on the Board of Directors as ExecutiveChairmanNeal V. Fenwick, age 51•2005 - present, Executive Vice President and Chief Financial Officer•1999 - 2005, Vice President Finance and Administration, ACCOWorld•1994 - 1999 Vice President Finance, ACCO Europe•Joined the Company in 1984Christopher M. Franey, age 56•2010 - present, Executive Vice President; President, ACCO BrandsInternational and President, Kensington Computer Products Group•2008 - 2010, President, Computer Products Group•Joined the Company in 2008Neil A. McLachlan, age 56•2012 - present, Executive Vice President; President, ACCO BrandsEmerging Markets•1999 - 2012, President, Consumer and Office Products Group,MeadWestvaco Corporation•Joined the Company in 2012 Thomas P. O'Neill, Jr, age 59•2008 - present, Senior Vice President, Finance and Accounting•2005 - 2008, Vice President, Finance and Accounting•Joined the Company in 2005Pamela R. Schneider, age 53•2012 - present, Senior Vice President, General Counsel andSecretary•2010 - 2012, General Counsel, Accertify, Inc.•2008 - 2010, Executive Vice President, General Counsel andSecretary, Movie Gallery, Inc.•2005 - 2008, Senior Vice President, General Counsel and Secretary,APAC Customer Services, Inc.•Joined the Company in 2012Thomas H. Shortt, age 44•2010 - present, Executive Vice President; President, Global Products•2009 - 2010, Chief Strategy and Supply Chain officer•2008 - 2009, Management Consultant focusing on supply chainimprovement•2004 - 2008, President, Unisource Worldwide, Inc.•Joined the Company in 2009.Thomas W. Tedford, age 42•2010 - present, Executive Vice President; President, ACCO BrandsU.S. Office and Consumer Products•2010 - 2010, Chief Marketing and Product Development Officer•2007 - 2010, Group Vice President, APAC Customer Services, Inc.•Joined the Company in 20107Table of ContentsITEM 1A. RISK FACTORSThe factors that are discussed below, as well as the matters that are generally set forth in this report on Form 10-K and the documentsincorporated by reference herein, could materially and adversely affect the Company’s business, results of operations and financial condition.Our business depends on a limited number of large and sophisticated customers, and a substantial reduction in sales to one or more ofthese customers could significantly impact our operating results.The office products industry is characterized by a small number of major customers, principally office products superstores (which combine contractstationers, retail and mail order), office products resellers and mass merchandisers. A relatively limited number of customers account for a large percentage ofour total net sales. Our top ten customers accounted for 53% of our net sales for the fiscal year ended December 31, 2012. Sales to Staples, our largestcustomer, during the same period amounted to approximately 13% of our 2012 net sales. Giving effect to the recently announced merger agreement entered intobetween Office Depot and Office Max, as if the contemplated merger had occurred on January 1, 2012, our sales to the combined companies and theirsubsidiaries would have represented approximately 15% of our 2012 net sales. Our large customers have the ability to obtain favorable terms, to directlysource their own private label products and to create and support new and competing suppliers. The loss of, or a significant reduction in, business from oneor more of our major customers could have a material adverse effect on our business, financial condition and results of operations.Our customers may further consolidate, which could adversely impact our margins and sales.Our customers have steadily consolidated over the last two decades. Recently, two of our large customers, Office Depot and Office Max, announced thatthey had entered into a merger agreement. While management currently expects the effects on our business of the proposed merger, if consummated, would berealized primarily in the retail channel, which only represents approximately one-third of our business with these customers, there can be no assurance that thecombination of these two large customers will not adversely affect our business and results of operations. Further, if this trend continues, it is likely to resultin further pricing pressures on us that could result in reduced margin and sales. Further, there can be no assurance that following consolidation largecustomers will continue to buy from us across different product segments or geographic regions, or at the same levels as prior to consolidation, which couldnegatively impact our financial results.Challenges related to the highly competitive business segments in which we operate could have a negative effect on our ongoing operations,revenues, results, cash flows or financial position.We operate in highly competitive business segments that face a number of challenges, including competitors with strong brands or brand recognition,significant private label producers, imports from a range of countries, low entry barriers, sophisticated and large buyers of office products, and potentialsubstitution from a range of products and services including electronic, digital or web-based products that can replicate or render obsolete or less desirablesome of the products we sell. In particular, our business is likely to be affected by: (1) the decisions and actions of our major customers, including theirdecisions on whether to increase their purchases of private label products; (2) decisions of current and potential suppliers of competing products on whether totake advantage of low entry barriers to expand their production; and (3) the decisions of end-users of our products to expand their use of substitute productsand, in particular, to shift their use of time management and planning products toward electronic and other substitutes. In addition, our competitive positiondepends on continued investment in innovation and product development, manufacturing and sourcing, quality standards, marketing and customer serviceand support. Our success will depend in part on our ability to anticipate and offer products that appeal to the changing needs and preferences of our customersin a market where many of our product categories are affected by continuing improvements in technology and shortened product lifecycles. We may not havesufficient resources to make the investments that may be necessary to anticipate or react to those changing needs, and we may not identify, develop and marketproducts successfully or otherwise be successful in maintaining our competitive position.Sales of our products may be adversely affected by issues that affect business, commercial and consumer spending decisions during periodsof economic uncertainty or weakness.Sales of our products can be very sensitive to uncertain U.S. and global economic conditions, particularly in categories where we compete against privatelabel, other branded and/or generic products that are competitive on price, quality, service or other grounds. In periods of economic uncertainty or weakness,the demand for our products may decrease, as businesses and consumers may seek or be forced to purchase more lower cost, private label or other economybrands, may more readily switch to electronic, digital or web-based products serving similar functions, or may forgo certain purchases altogether. As a result,adverse changes in U.S. or global economic conditions or sustained periods of economic uncertainty or weakness could negatively affect our8Table of Contentsearnings and could have a material adverse effect on our business, results of operations, cash flows and financial position.If the operating results for Mead C&OP following the Merger are poor, or if we fail to realize anticipated cost synergies and growthopportunities, we may not achieve the financial results that we expect as a result of the Merger.We believe that we will derive a significant portion of our future revenues and earnings per share from the operations of Mead C&OP. Therefore, anynegative impact on those business operations could harm our operating results. Some of the significant factors that could harm the operations of Mead C&OP,and therefore harm our operating results, include increases in the prices of raw materials, competitive pressure from existing or new companies, increased useof direct shipment sourcing by our customers, a decline in the markets served by Mead C&OP and general economic conditions.Among the factors considered in connection with our acquisition of Mead C&OP were the opportunities for cost synergies, growth opportunities andother financial and operating benefits. Our ability to fully realize these cost synergies, growth opportunities and other financial and operating benefits, and thetiming of this realization, depends on the successful integration of Mead C&OP. We cannot predict with certainty if or when these cost synergies, growthopportunities and benefits may occur, or the extent to which they actually will be achieved. For example, the benefits from the Merger may be offset bysignificant costs that may be incurred in integrating Mead C&OP. Realization of any benefits and cost synergies could be adversely affected by difficulties inintegrating the businesses, as described below, and a number of factors beyond our control, including, without limitation, deteriorating or anemic economicconditions, increased operating costs, increased competition and regulatory developments.Our continued integration of Mead C&OP may present significant challenges, and we may be unable to quickly and effectively integrateMead C&OP with our historical operations.We continue to integrate and coordinate key elements of Mead C&OP with our historical operations; however, given the size and significance of theacquisition, we may encounter significant difficulties during the process of fully integrating Mead C&OP. These difficulties include: •the integration of Mead C&OP while carrying on our ongoing operations;•the need to coordinate geographically separate organizations;•challenges involving combining different corporate cultures;•challenges and costs associated with integrating the information technology systems of Mead C&OP with ours, which presently are run underdifferent operating software systems; and•potential difficulties in retaining key officers and personnel.The process of continuing to integrate operations could cause an interruption of, or loss of momentum in, the activities of one or more of our businesses.Members of our senior management may need to devote considerable amounts of time to this integration process, which will decrease the time they will have tomanage our business, service existing customers, attract new customers and develop new products or strategies. If our senior management is not able toeffectively manage the integration process, or if any significant business activities are interrupted as a result of the integration process, our business couldsuffer.Difficulties in the integration and transition associated with Mead C&OP, including those relating to changes to or implementation of critical informationtechnology systems, together with our increased size and global presence, could also adversely affect our internal control over financial reporting, ourdisclosure controls and our ability to effectively and timely report our financial results. Our acquisition of Mead C&OP may require significant modificationsto our internal control systems, processes and information systems, both on a transition basis and over the longer-term as we fully integrate Mead C&OP.Since the acquisition of Mead C&OP occurred in the second quarter of 2012, the scope of our assessment of the effectiveness of internal control over financialreporting contained in this report does not include Mead C&OP. If we were to be unable to accurately report our financial results in a timely manner or unableto assert that our internal controls over financial reporting or our disclosure controls are effective, our business, results of operations and financial conditionand the market perception thereof could be materially adversely affected.If we fail to integrate our operations quickly and effectively, there could be uncertainty in the marketplace or concerns among our customers regarding theimpact of the acquisition of Mead C&OP, which could materially adversely affect our businesses, financial condition and results of operations.9Table of ContentsOur growth strategy includes increased concentration in our emerging market geographies, which could create greater exposure to unstablepolitical conditions, civil unrest or economic volatility.With the acquisition of Mead C&OP more of the Company's sales are derived from emerging markets such as Brazil, Mexico and Chile. The profitablegrowth of our business in developing and emerging markets is key to our long term growth strategy. If we are unable to successfully expand our businesses indeveloping and emerging markets, or achieve the return on capital we expect as a result of our investments, our financial performance could be adverselyaffected.Factors that could adversely affect our business results in these developing and emerging markets include: regulations on the transfer of funds to andfrom foreign countries, which, from time to time, result in significant cash balances in foreign countries, and limitations on the repatriation of funds;currency hyperinflation or devaluation; the lack of well-established or reliable legal systems; and increased costs of business due to compliance with complexforeign and United States laws and regulations that apply to our international operations, including the U.S. Foreign Corrupt Practices Act and the U.K.Bribery Act, and adverse consequences, such as the assessment of fines or penalties, for failing to comply with these laws and regulations. In addition,disruption in these markets due to political instability or civil unrest could result in a decline in consumer purchasing power, thereby reducing demand for ourproducts.Litigation or legal proceedings could expose us to significant liabilities and damage our reputation.In connection with our May 1, 2012 acquisition of Mead C&OP, we assumed all of the tax liabilities for the acquired foreign operations. In December of2012, the Federal Revenue Department of the Ministry of Finance of Brazil ("FRD") issued a tax assessment against our newly acquired indirect subsidiary,Tilibra Produtos de Papelaria Ltda. ("Tilibra"), which challenged the goodwill recorded in connection with the 2004 acquisition of Tilibra. This assessmentdenied the deductibility of that goodwill from Tilibra's taxable income for the year 2007. The assessment seeks payment of approximately R$26.9 million($13.2 million based on current exchange rates) of tax, penalties and interest.In January of 2013, Tilibra filed a protest disputing the tax assessment at the first administrative level of appeal within the FRD. We believe that we havemeritorious defenses and intend to vigorously contest this matter, however, there can be no assurances that we will ultimately prevail. We are in the early stagesof the process to challenge the FRD's tax assessment, and the ultimate outcome will not be determined until the Brazilian tax appeal process is complete, whichis expected to take many years. In addition, Tilibra's 2008-2012 tax years remain open and subject to audit, and there can be no assurances that we will notreceive additional tax assessments regarding the goodwill deducted for the Tilibra acquisition for one or more of these years, which could increase theCompany’s exposure to a total of approximately $44.5 million (based on current exchange rates), including interest and penalties which have accumulated todate. If the FRD's initial position is ultimately sustained, the amount assessed would adversely affect our reported cash flow in the year of settlement.Because there is no settled legal precedent on which to base a definitive opinion as to whether we will ultimately prevail, the Company considers theoutcome of this dispute to be uncertain. Since it is not more likely than not that we will prevail, in the fourth quarter of 2012, we recorded a reserve in theamount of $44.5 million in consideration of this matter. In addition, the Company will continue to accrue interest related to this matter until such time as theoutcome is known or until evidence is presented that we are more likely than not to prevail.There are various other claims, lawsuits and pending actions against us incidental to our operations. It is the opinion of management that the ultimateresolution of these matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows. However, we canmake no assurances that we will ultimately be successful in our defense of any of these matters.For further information see Note 3, Acquisitions, to the consolidated financial statements contained in Item 8 of this report.Risks associated with outsourcing the production of certain of our products could materially and adversely affect our business, financialcondition and results of operations.We outsource certain manufacturing functions to suppliers in China and other Asia-Pacific countries. All of our suppliers must comply with our designand product content specifications, applicable laws, including product safety, security, labor and environmental laws, and otherwise be certified as meetingour and our customers' supplier codes of conduct. Outsourcing generates a number of risks, including decreased control over the manufacturing processpotentially leading to production delays or interruptions, inferior product quality control and misappropriation of trade secrets. In addition, performanceproblems by these suppliers could result in cost overruns, delayed deliveries, shortages, quality and compliance issues or other problems, which couldmaterially and adversely affect our business, financial condition and results of operations.10Table of ContentsIf one or more of these suppliers becomes insolvent or unable or unwilling to continue to provide products of acceptable quality, at acceptable costs or ina timely manner, our ability to deliver our products to our customers could be severely impaired. In addition, as we expect our suppliers to comply with and beresponsive to our security audits and conform to our and our customers' expectations with respect to product quality and social responsibility, any failure todo so may result in our having to cease contracting with such supplier or cease production at a particular facility. Any need to identify and qualify substitutesuppliers or facilities or increase our internal capacity could result in unforeseen operational problems and additional costs. Substitute suppliers might not beavailable or, if available, might be unwilling or unable to offer products on acceptable terms. Moreover, if customer demand for our products increases, wemay be unable to secure sufficient additional capacity from our current suppliers, or others, on commercially reasonable terms, if at all.Some of our suppliers are dependent upon other industries for raw materials and other products and services necessary to produce and provide theproducts they supply to us. Any adverse impacts to those industries could have a ripple effect on these suppliers, which could adversely impact their ability tosupply us at levels we consider necessary or appropriate for our business, or at all. Any such disruptions could negatively impact our ability to deliverproducts and services to our customers, which in turn could have an adverse impact on our business, operating results, financial condition or cash flow.Decline in the use of paper-based dated time management and productivity tools could adversely affect our business.A number of our products and brands consist of paper-based time management and productivity tools, that historically have tended to be higher-marginproducts. However, consumer preference for technology-based solutions for time management and planning continues to grow worldwide. Many consumersuse or have access to electronic tools that may serve as substitutes for traditional paper-based time management and productivity tools. Accordingly, thecontinued introduction of new digital software applications and web-based services by companies offering time management and productivity solutions couldadversely impact the revenue and profitability of our largely paper-based portfolio of time management products.Material disruptions at one of our or our suppliers' major manufacturing or distribution facilities could negatively impact our financialresults.A material operational disruption in one of our or any our supplier's major facilities could negatively impact production, customer deliveries and ourfinancial results. Such a disruption could occur as a result of any number of events including but not limited to a major equipment failure, labor stoppages,transportation failures affecting the supply and shipment of materials and finished goods, severe weather conditions, natural disasters, civil unrest, war orterrorism and disruptions in utility services.We rely extensively on information technology systems to operate, transact and otherwise manage our business. Any material failure,inadequacy, interruption or security failure of that technology or its infrastructure could harm our ability to effectively operate our business.We rely extensively on our information technology systems, most of which are managed by third-party service providers, across our operations. Ourability to effectively manage our business and execute the production, distribution and sale of our products as well as our ability to manage and report ourfinancial results and run other support functions depends significantly on the reliability and capacity of these systems and our third-party service providers.The failure of these systems to operate effectively, problems with transitioning to upgraded or replacement systems, or a breach in the security of these systemscould disrupt service to our customers and adversely affect our business, financial results of operations and financial condition.We have a significant amount of indebtedness, which could adversely affect our business, results of operations and financial condition.As of December 31, 2012, we had $1.07 billion of outstanding debt. This indebtedness could adversely affect us in a number of ways, includingrequiring us to dedicate a substantial portion of our cash flow from operating activities to payments on our indebtedness, thereby reducing the availability ofour cash flow to fund working capital, capital expenditures, research and development efforts, potential strategic acquisitions and other general corporatepurposes. In addition, approximately $569 million of our outstanding debt is subject to floating interest rates which increases our exposure to fluctuations inmarket interest rates. Our significant indebtedness also may increase our vulnerability to economic downturns and changing market conditions and place us ata competitive disadvantage relative to competitors that have less debt, all of which could adversely affect our business, results of operations and financialcondition.11Table of ContentsThe agreements governing our indebtedness contain financial and other restrictive covenants that limit our ability to engage in certainactivities that may be in our long-term best interests.The agreements governing our indebtedness contain financial and other covenants that limit our ability to engage in certain activities and restrict ouroperational flexibility. These restrictive covenants also may limit our ability to obtain additional financing to fund growth, working capital or capitalexpenditures, or to fulfill other cash requirements. Among other things, these covenants restrict or limit our ability to incur additional indebtedness, incurcertain liens on our assets, issue preferred stock or certain disqualified stock, pay cash dividends, make restricted payments, including investments, sell ourassets or merge with other companies, and enter into transactions with affiliates. We are also required to maintain specified financial ratios under certainconditions and satisfy financial condition tests under our credit facility. These covenants, ratios and tests may limit or prohibit us from engaging in certainactivities and transactions that may be in our long-term best interests, and could place us at a competitive disadvantage relative to our competitors, whichcould adversely affect our business and results of operations.Our failure to comply with our debt covenants could result in an event of default that, if not cured or waived, could result in the accelerationof all of our debts.Our ability to comply with the covenants and financial ratios and tests under the agreements governing our indebtedness may be affected by eventsbeyond our control, and we may not be able to continue to meet those covenants, ratios and tests. Our ability to generate sufficient cash from operations to meetour debt obligations will depend upon our future operating performance, which will be affected by general economic, financial, competitive, legislative,regulatory, business and other factors. Our breach of any of these covenants, ratios or tests, or any inability to pay interest on, or principal of, ouroutstanding debt as it becomes due, could result in an event of default, in which case our lenders could declare all amounts outstanding to be immediately dueand payable. If our lenders accelerate our indebtedness, our assets may not be sufficient to repay in full such indebtedness and any other indebtedness thatwould become due as a result of such acceleration and, if we were unable to obtain replacement financing or any such replacement financing was on terms thatwere less favorable than the indebtedness being replaced, our liquidity and results of operations would be materially and adversely affected. See“Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.”Our business is subject to risks associated with seasonality, which could adversely affect our cash flow, financial condition or results ofoperations.Historically, our business, as it concerns both historical sales and profit, experiences higher sales volume in the third and fourth quarters of the calendaryear, and with our acquisition of Mead C&OP, this seasonality is expected to continue. Two principal factors have contributed to this seasonality: the officeproducts industry's customers and our product line. We are major suppliers of products related to the “back-to-school” season, which occurs principally fromJune through September for our North American business, from November through January for our Australian business, and predominantly from Octoberthrough December for our Brazilian business. Our product line also includes a number of products that lend themselves to calendar year-end purchase timing.As a result, we historically have generated, and expect to continue to generate, most of our earnings in the second half of the year and much of our cash flow inthe first quarter as receivables are collected. If these typical seasonal increases in sales of certain portions of our product line do not materialize, it may have anoutsized impact on our business, which could result in a material adverse effect on our financial condition and results of operations.Risks associated with currency volatility could harm our sales, profitability and cash flows.Approximately 45% of our net sales for the fiscal year ended December 31, 2012 were from foreign sales. The acquisition of Mead C&OP significantlyincreased our sales in Brazil and Canada. While the recent relative volatility of the U.S. dollar to other currencies has impacted our businesses' sales,profitability and cash flows as the results of non-U.S. operations are reported in U.S. dollars, we cannot predict the rate at which the U.S. dollar will tradeagainst other currencies in the future. If the U.S. dollar were to substantially strengthen, making the dollar significantly more valuable relative to othercurrencies in the global market, such an increase could harm our ability to compete or competitively price in those markets, and therefore, materially andadversely affect our financial condition and our results of operations. Approximately half of the products we sell are sourced from China and other Asia-Pacific countries and are paid for in U.S. dollars. Thus, movements in the value of local currency relative to the U.S. dollar in countries where we source ourproducts have the same impacts as raw material price changes in addition to the currency translation impact noted above.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, zinc and cork. In general, our gross profit may be affected from time to time12Table of Contentsby fluctuations in the prices of these materials because our customers require advance notice and negotiation to pass through raw material price increases,giving rise to a delay before cost increases can be passed to our customers. We attempt to reduce our exposure to increases in these costs through a variety ofmeasures, including periodic purchases, future delivery contracts and longer-term price contracts together with holding our own inventory; however, thesemeasures may not always be effective. Inflationary and other increases in costs of materials and labor have occurred in the past and may recur, and rawmaterials may not continue to be available in adequate supply in the future. Shortages in the supply of any of the raw materials we use in our products andother factors, such as inflation, could result in price increases that could have a material adverse effect on our financial condition or results of operations.Our pension costs could substantially increase as a result of volatility in the equity markets or interest rates.The difference between plan obligations and assets, or the funded status of our defined benefit pension plans, is a significant factor in determining thenet periodic benefit costs of our pension plans and the ongoing funding requirements of those plans. Changes in interest rates and the market value of planassets impact the funded status of these plans and cause volatility in the net periodic benefit cost and future funding requirements of these plans. TheCompany's cash contributions to pension and defined benefit plans totaled $19.2 million in 2012; however the exact amount of cash contributions made topension plans in any year is dependent upon a number of factors, including the investment returns on pension plan assets. A significant increase in ourpension funding requirements could have a negative impact on our cash flow and financial condition. In addition the acquisition of Mead C&OP increased ourpension and post-retirement obligations in the U.S. and Canada, which may cause further increases in our pension retirement funding.Impairment charges could have a material adverse effect on our financial results.We have recorded significant amounts of goodwill and other intangible assets, which increased substantially as a results of our acquisition of MeadC&OP. In prior years, we have recorded significant goodwill and other asset impairment charges that adversely affected our financial results. Future eventsmay occur that may also adversely affect the reported value of our assets and require impairment charges, which could further adversely affect our financialresults. Such events may include, but are not limited to, a sustained decline in our stock price, strategic decisions made in response to changes in economicand competitive conditions, the impact of the economic environment on our customer base or a material adverse change in our relationship with significantcustomers.We are subject to supplier credit and order fulfillment risk.We purchase products for resale under credit arrangements with our suppliers. In weak global markets, suppliers may seek credit insurance to protectagainst non-payment of amounts due to them. During any period of declining operating performance, or should we experience severe liquidity challenges,suppliers may demand that we accelerate our payment for their products. Also, credit insurers may curtail or eliminate coverage to the suppliers. If suppliersbegin to demand accelerated payment of amounts due to them or if they begin to require advance payments or letters of credit before goods are shipped to us,these demands could have a significant adverse impact on our operating cash flow and result in a severe drain on our liquidity.A bankruptcy of one or more of our major customers could have a material adverse effect on our financial condition and results ofoperations.Our concentrated customer base increases our customer credit risk. Were any of our major customers to make a bankruptcy filing, we could beadversely impacted due to not only a reduction in future sales but also losses associated with the potential inability to collect any outstanding accountsreceivable from such customer. Such a result could negatively impact our financial results and cash flows.We are subject to global environmental regulation and environmental risks as well as product content and product safety laws andregulations.We and our operations, both in the U.S. and abroad, are subject to national, state, provincial and/or local environmental laws and regulations thatimpose limitations and prohibitions on the discharge and emission of, and establish standards for the use, disposal and management of, certain materials andwaste. We are also subject to laws regulating the content of toxic chemicals and materials in the products we sell as well as laws, directives and self-regulatoryrequirements related to the safety of our products. Environmental and product content and product safety laws and regulations can be complex and maychange often. Capital and operating expenses required to comply with environmental and product content laws and regulations can be significant, andviolations may result in substantial fines, penalties and civil damages. The costs of complying with environmental and product content and product safetylaws and regulations and any claims concerning noncompliance, or liability with respect to contamination13Table of Contentsin the future could have a material adverse effect on our financial condition or results of operations.Any inability to secure, protect and maintain rights to intellectual property could have material adverse impact on our business.We own and license many patents, trademarks, brand names and trade names that are, in the aggregate, important to our business. The loss of anyindividual patent 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 could have a material adverse effect on our business.We could also incur substantial costs to pursue legal actions relating to the unauthorized use by third parties of our intellectual property, which couldhave a material adverse effect on our business, results of operation or financial condition. If our brands become diluted, if our patents are infringed or if ourcompetitors introduce brands and products that cause confusion with our brands in the marketplace, the value that our consumers associate with our brandsmay become diminished, which could negatively impact our sales. If third parties assert claims against our intellectual property rights and we cannotsuccessfully resolve those claims, or our intellectual property becomes invalidated, we could lose our ability to use the technology, brand names or otherintellectual property that were the subject of those claims, which, if such intellectual property is material to the operation of our business or our financialresults, could have a material adverse effect on our business, financial condition and results from operations.We may also become involved in defending intellectual property claims being asserted against us that could cause us to incur substantial costs, divertthe efforts of our management, and require us to pay substantial damages or require us to obtain a license, which might not be available on reasonable terms,if at all.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 and penalties which could have a material effect on our financial condition and results of operations, product liability claimsor regulatory actions could result in negative publicity that could harm our reputation in the marketplace or the value of our end-user brands. We also could berequired to recall and possibly discontinue the sale of possible defective or unsafe products, which could result in adverse publicity and significant expenses.Although we maintain product liability insurance coverage, potential product liability claims are subject to a self-insured deductible or could be excluded underthe terms of the policy.We are unable to take certain significant actions following the Merger because such actions could adversely affect the tax-free status of theDistribution or the Merger. In certain circumstances, we may be obligated to indemnify MeadWestvaco Corporation (“MWV”) for any payment ofUnited States federal income taxes by MWV that result from our taking or failing to take certain actions in connection with the Distribution andthe Merger.In connection with (i) the transfer by MWV of Mead C&OP (the “Separation”) to a subsidiary we acquired pursuant to the Merger (“Monaco SpinCo”);(ii) the distribution by MWV of Monaco Spinco shares to MWV stockholders (the “Distribution”); and (iii) the Merger (the Separation, the Distribution, theMerger and certain related financing transactions being collectively referred to as the “Transactions”), MWV received a private letter ruling from the InternalRevenue Service (the “IRS”) as to the tax-free nature of the Transactions, MWV and Monaco SpinCo received an opinion from MWV's counsel as to the tax-free nature of the Distribution, and we, MWV and Monaco SpinCo received certain legal opinions from our respective counsel as to the tax-free nature of theMerger. The opinions of counsel were based on, among other things, the IRS ruling as to the matters addressed by the ruling, current law and certainassumptions and representations as to factual matters made by us, MWV and our respective subsidiaries.In connection with the Transactions, we entered into a tax matters agreement with MWV (the “Tax Matters Agreement”). The Tax Matters Agreementprohibits us from taking certain actions that could cause the Distribution or the Merger to be taxable. In particular, for two years after the Distribution, theCompany and Mead Products (as successor by merger to Monaco SpinCo) may not, among other things: (i) engage in any transaction or series of transactionsthat would result in one or more persons acquiring (directly or indirectly) stock comprising 50% or more of the vote or value of Mead Products; (ii) redeem orrepurchase any stock or stock rights; (iii) amend its certificate of incorporation or take any other action affecting the relative voting rights of its capital stock;(iv) merge, consolidate or amalgamate with any other person (other than pursuant to a merger, consolidation or amalgamation with [the Company or with anyof its wholly-owned subsidiaries]); or (v) sell, transfer or otherwise dispose of assets (including stock of subsidiaries) that constitute more than 30% of theconsolidated gross assets of the Company, Mead Products and/or their subsidiaries (subject to exceptions for, among other things, ordinary coursedispositions). Similar restrictions apply to Monaco Foreign Spinco Invest Ltd., a wholly owned subsidiary of the Company that was a wholly ownedsubsidiary of Monaco14Table of ContentsSpinCo at the time of the Distribution, because the stock of Monaco Foreign Spinco Invest Ltd. was distributed in a tax-free distribution within MWV'sconsolidated tax group prior to the Distribution.Because of these restrictions, we may be limited in the amount of stock that we can issue to make acquisitions or raise additional capital in the two yearsafter the completion of the Merger, which could have a material adverse effect on our liquidity and financial condition. If we wish to take any such restrictedaction, we are required to cooperate with MWV in obtaining a supplemental IRS ruling or an unqualified tax opinion.Under the Tax Matters Agreement, in certain circumstances and subject to certain limitations, we are required to indemnify MWV against any taxes onthe Distribution that arise if we or our subsidiaries take certain actions or fail to take certain actions, or as a result of certain changes in the ownership of ourstock following the Merger, that adversely affect the tax-free status of the Distribution or the Merger. Moreover, if we do not carefully monitor our compliancewith the Tax Matters Agreement and relevant IRS rules, we might inadvertently trigger our obligation to indemnify MWV. If we are required to indemnifyMWV in the event the Distribution is taxable, this indemnification obligation would be substantial and could have a material adverse effect on our financialcondition and results of operations.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. Wemay not be able to attract and retain qualified management and other personnel necessary for the development, manufacture and sale of our products, and keyemployees may not remain with us in the future. If we fail to retain our key employees, we may experience substantial disruption in our businesses. Employeeretention may be particularly challenging in light of the Merger, as employees may feel uncertain about their future roles with us after the combination. Theloss of key management personnel or other key employees or our potential inability to attract such personnel may adversely affect our ability to manage ouroverall operations, successfully implement our business strategy, and realize the anticipated benefits of the Merger.Additionally, we rely to a significant degree on compensating our officers and key employees with incentive awards that pay out only if specifiedperformance goals have been met. To the extent these performance goals are not met and the incentive awards do not pay out, or pay out less than the targetedamount, as has occurred in recent years, it may motivate certain officers and key employees to seek other opportunities.ITEM 1B.UNRESOLVED STAFF COMMENTSNone.15Table of ContentsITEM 2. PROPERTIESWe have manufacturing facilities in North America, Europe, Brazil, Mexico and Australia, and maintain distribution centers in relation to the regionalmarkets we service. We lease our principal U.S. headquarters in Lincolnshire, Illinois and plan to relocate our headquarters to Lake Zurich, Illinois during thesecond quarter of 2013. The following table lists our principal manufacturing and distribution facilities as of December 31, 2012: LocationFunctional Use Owned/LeasedU.S. Properties: Ontario, CaliforniaDistribution/Manufacturing LeasedBooneville, MississippiDistribution/Manufacturing Owned/LeasedOgdensburg, New YorkDistribution/Manufacturing Owned/LeasedSidney, New YorkDistribution/Manufacturing OwnedAlexandria, PennsylvaniaDistribution/Manufacturing OwnedEast Texas, Pennsylvania(1)Distribution/Manufacturing/Office OwnedPleasant Prairie, WisconsinDistribution/Manufacturing LeasedNon-U.S. Properties: Sydney, AustraliaDistribution/Manufacturing OwnedBauru, BrazilDistribution/Manufacturing/Office OwnedBrampton, CanadaDistribution/Manufacturing/Office LeasedMissisauga, CanadaDistribution/Manufacturing/Office LeasedTabor, Czech RepublicManufacturing OwnedHalesowen, EnglandDistribution OwnedLillyhall, EnglandManufacturing LeasedTornaco, ItalyDistribution LeasedLerma, MexicoManufacturing/Office OwnedBorn, NetherlandsDistribution LeasedWellington, New ZealandDistribution/Office OwnedArcos de Valdevez, PortugalManufacturing Owned(1)Scheduled to be closed during the second quarter of 2013. Manufacturing and distribution activities will be substantially relocated to Sidney, New York.We believe that the properties are suitable to the respective businesses and have production capacities adequate to meet the needs of our businesses.ITEM 3. LEGAL PROCEEDINGSIn connection with our May 1, 2012 acquisition of Mead C&OP, we assumed all of the tax liabilities for the acquired foreign operations. In December of2012, the Federal Revenue Department of the Ministry of Finance of Brazil ("FRD") issued a tax assessment against our newly acquired indirect subsidiary,Tilibra Produtos de Papelaria Ltda. ("Tilibra"), which challenged the goodwill recorded in connection with the 2004 acquisition of Tilibra. This assessmentdenied the deductibility of that goodwill from Tilibra's taxable income for the year 2007. The assessment seeks a payment of approximately R$26.9 million($13.2 million based on current exchange rates) of tax, penalties and interest.In January of 2013, Tilibra filed a protest disputing the tax assessment at the first administrative level of appeal within the FRD. We believe that we havemeritorious defenses and intend to vigorously contest this matter, however, there can be no assurances that we will ultimately prevail. We are in the early stagesof the process to challenge the FRD's tax assessment, and the ultimate outcome will not be determined until the Brazilian tax appeal process is complete, whichis expected to take many years. In addition, Tilibra's 2008-2012 tax years remain open and subject to audit, and there can be no assurances that we will notreceive additional tax assessments regarding the goodwill deducted for the Tilibra acquisition for one or more of those years, which could increase theCompany's exposure to a total of approximately $44.5 million (based on current exchange rates), including interest16Table of Contentsand penalties which have accumulated to date. If the FRD's initial position is ultimately sustained, the amount assessed would adversely affect our reportedcash flow in the year of settlement.Because there is no settled legal precedent on which to base a definitive opinion as to whether we will ultimately prevail, the Company considers theoutcome of this dispute to be uncertain. Since it is not more likely than not that we will prevail, in the fourth quarter of 2012, we recorded a reserve in theamount of $44.5 million in consideration of this matter. In addition, the Company will continue to accrue interest related to this matter until such time as theoutcome is known or until evidence is presented that we are more likely than not to prevail.For further information see Note 3, Acquisitions, to the consolidated financial statements contained in Item 8 of this report.There are various other claims, lawsuits and pending actions against us incidental to our operations. It is the opinion of management that the ultimateresolution of these matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows. However, we canmake no assurances that we will ultimately be successful in our defense of any of these matters.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.17Table of ContentsPART II ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERPURCHASES OF EQUITY SECURITIESOur common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “ACCO.” The following table sets forth, for the periodsindicated, the high and low sales prices for our common stock as reported on the NYSE for 2011 and 2012: High Low2011 First Quarter$9.66 $7.77Second Quarter$10.39 $6.91Third Quarter$8.89 $4.62Fourth Quarter$10.20 $4.332012 First Quarter$13.25 $9.24Second Quarter$13.30 $8.50Third Quarter$10.94 $6.01Fourth Quarter$7.95 $5.80As of February 1, 2013, we had approximately 18,263 registered holders of our common stock.Dividend PolicyWe have not paid any dividends on our common stock since becoming a public company. We intend to retain any future earnings to reduce ourindebtedness and fund the development and growth of our business. Currently our debt agreements restrict our ability to make dividend payments and we donot anticipate paying any cash dividends in the foreseeable future. Any determination as to the declaration of dividends is at our Board of Directors’ solediscretion based on factors it deems relevant.18Table of ContentsSTOCK PERFORMANCE GRAPHThe following graph compares the cumulative total stockholder return on our common stock to that of the S&P Office Services and Supplies(SuperCap1500) Index and the Russell 2000 Index assuming an investment of $100 in each from December 31, 2007 through December 31, 2012. Cumulative Total Return 12/31/07 12/31/08 12/31/09 12/31/10 12/31/11 12/31/12ACCO Brands Corporation.$100.00 $21.51 $45.39 $53.12 $60.16 $45.76Russell 2000100.00 66.21 84.20 106.82 102.36 119.09S&P Office Services and Supplies(SuperCap1500)100.00 61.97 72.79 86.16 70.12 72.7919Table of ContentsITEM 6. SELECTED FINANCIAL DATASELECTED HISTORICAL FINANCIAL DATAThe following table sets forth our selected consolidated financial data. The selected consolidated financial data as of and for the five fiscal years endedDecember 31, 2012 are derived from our consolidated financial statements. The data should be read in conjunction with the consolidated financial statementsand related notes included elsewhere in this annual report. Year Ended December 31, 2012(1) 2011 2010 2009 2008(in millions of dollars, except per share data) Income Statement Data: Net sales$1,758.5 $1,318.4 $1,284.6 $1,233.3 $1,539.2Operating income (loss)(2)139.3 115.2 109.7 75.4 (199.9)Interest expense, net89.3 77.2 78.3 67.0 63.7Other expense (income), net(2)61.3 3.6 1.2 5.4 (17.8)Income (loss) from continuing operations(3)117.0 18.6 7.8 (118.6) (255.1)Per common share: Income (loss) from continuing operations(3) Basic$1.24 $0.34 $0.14 $(2.18) $(4.71)Diluted$1.22 $0.32 $0.14 $(2.18) $(4.71)Balance Sheet Data (at year end): Total assets$2,507.7 $1,116.7 $1,149.6 $1,106.8 $1,282.2External debt1,072.1 669.0 727.6 725.8 708.7Total stockholders’ equity (deficit)639.2 (61.9) (79.8) (117.2) (3.4)Other Data: Cash (used) provided by operating activities$(7.5) $61.8 $54.9 $71.5 $37.2Cash (used) provided by investing activities(423.2) 40.0 (14.9) (3.9) (18.7)Cash provided (used) by financing activities360.1 (63.1) (0.1) (44.5) (37.7) (1)On May 1, 2012, the Company completed the Merger of the Mead C&OP with a wholly-owned subsidiary of the Company. Accordingly, theresults of Mead C&OP are included in the Company's consolidated financial statements from the date of the Merger. For further information on theMerger, see Note 3, Acquisitions, to the consolidated financial statements, contained in Item 8 of this report.(2)Income (loss) from continuing operations in the years 2009 and 2008 was impacted by non-cash goodwill and asset impairment charges of $1.7million and $263.8 million, respectively.Income (loss) from continuing operations in the year 2012 was impacted by $61.4 million in charges related to the refinancingcompleted in 2012 and recorded within Other expense (income), net. For further information on our refinancing, see Note 4, Long-term Debt andShort-term Borrowings, to the consolidated financial statements, contained in Item 8 of this report. The year 2008 was impacted by a $19.0million gain due to early extinguishment of debt relating to the purchase of $49.6 million of our debt.(3)Income (loss) from continuing operations for the years 2012, 2011, 2010, 2009 and 2008 was impacted by restructuring charges (income) of $24.3 million,$(0.7) million, $(0.5) million, $17.4 million and $28.8 million, respectively.Income (loss) from continuing operations for the years 2009 and 2008 was impacted by certain other charges that have been recorded within cost ofproducts sold, and advertising, selling, general and administrative expenses. These charges are incremental to the cost of our underlyingrestructuring actions and do not qualify as restructuring. These charges include redundant warehousing or storage costs during the transition tonew distribution centers, equipment and other asset move costs, ongoing facility overhead and maintenance costs after exit, gains on the sale ofexited facilities, certain costs associated with our debt refinancing and employee retention incentives. Within cost of products sold on theConsolidated Statements of Operations for the years ended December 31, 2009 and 2008, these charges totaled $3.420Table of Contentsmillion and $7.5 million, respectively. Within advertising, selling, general and administrative expenses on the Consolidated Statements ofOperations for the years ended December 31, 2009, and 2008, these charges totaled $1.2 million and $3.1 million, respectively. Included withinthe 2008 result, is a charge for $4.2 million related to the exit of the Company’s former CEO, a $3.5 million gain on the sale of a manufacturingfacility and net gains of $2.4 million on the sale of three additional properties. We did not incur these other charges in 2012, 2011 and 2010.During 2009, we recorded a non-cash charge of $108.1 million to establish a valuation allowance against our U.S. deferred taxes. Following theMerger in the second quarter of 2012, we released into income $126.1 million of the valuation allowance that had been previously recorded againstthe U.S. deferred income tax assets. For a further discussion of the valuation allowance, see Note 11, Income Taxes, to the consolidated financialstatements, contained in Item 8 of this report.21Table of ContentsITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS INTRODUCTIONACCO Brands is one of the world's largest suppliers of branded school and office products (excluding furniture, computers, printers and bulk paper).We sell our products through many channels that include the office products resale industry as well as through mass retail distribution and e-tailers. Wedesign, develop, manufacture and market a wide variety of traditional and computer-related office products, school supplies and paper-based timemanagement products. Through a focus on research, marketing and innovation, we seek to develop new products that meet the needs of our consumers andcommercial end-users, and support our brands. We compete through a balance of innovation, a low-cost operating model and an efficient supply chain. Wesell our products primarily to markets located in the United States, Northern Europe, Canada, Brazil, Australia and Mexico.Our office, school and calendar product lines use name brands such as AT-A-GLANCE®, Day-Timer®, Five Star®, GBC®, Hilroy®, Marbig, Mead®,NOBO, Quartet®, Rexel, Swingline®, Tilibra®, Wilson Jones® and many others. Our products and brands are not confined to one channel or productcategory and are designed based on end-user preference. We currently manufacture approximately half of our products, and specify and source approximatelythe other half of our products, mainly from Asia.The majority of our office products, such as stapling, binding and laminating equipment and related consumable supplies, shredders and whiteboards,are used by businesses. Most of these business end-users purchase their products from our customers, which include commercial contract stationers, retailsuperstores, mass merchandisers, wholesalers, resellers, mail order and internet catalogs, club stores and dealers. We also supply some of our productsdirectly to large commercial and industrial end-users. Historically, we have targeted the premium end of the product categories in which we compete. However,we also supply private label products for our customers and provide business machine maintenance and certain repair services. Our school products include notebooks, folders, decorative calendars, and stationery products. We distribute our school products primarily throughtraditional and online retail mass market, grocery, drug and office superstore channels. We also supply private label products within the school productssector. Our calendar products are sold throughout all channels where we sell office or school products, and we also sell direct to consumers.Our Computer Products Group designs, distributes, markets and sells accessories for laptop and desktop computers, tablets and smartphones. Theseaccessories primarily include security products, iPad® covers and keypads, smartphone accessories, power adapters, input devices such as mice, laptopcomputer carrying cases, hubs, docking stations and ergonomic devices. We sell these products mostly under the Kensington®, Microsaver® and ClickSafe®brand names. All of our computer products are manufactured by third-party suppliers, principally in Asia, and are stored in and distributed from our regionalfacilities. These computer products are sold primarily to consumer electronics online retailers, information technology value-added resellers, original equipmentmanufacturers and office products retailers.We believe our leading product positions provide the scale to enable us to invest in product innovation and drive growth across our product categories. Inaddition, the expertise we use to satisfy the exacting technical specifications of our more demanding commercial customers is in many instances the basis forexpanding our products and innovations to consumer products. We plan to grow via a strategy of organic growth supplemented by acquisitions that canleverage our existing business.Mead C&OP Merger and Debt RefinancingOn November 17, 2011, we announced the signing of a definitive agreement to acquire the Mead Consumer and Office Products Business (“MeadC&OP”). On May 1, 2012, we completed the merger ("Merger") of Mead C&OP with a wholly-owned subsidiary of the Company. Mead C&OP is a leadingmanufacturer and marketer of school supplies, office products, and planning and organizing tools - including the Mead®, Five Star®, Trapper Keeper®, AT-A-GLANCE®, Cambridge®, Day Runner®, Hilroy, Tilibra and Grafons brands in the U.S., Canada and Brazil.In the Merger, MeadWestvaco Corporation (“MWV”) shareholders received 57.1 million shares of the Company's common stock, or 50.5% of thecombined company, valued at $602.3 million on the date of the Merger. After the transaction was completed we had 113.1 million common sharesoutstanding.Under the terms of the Merger agreement, MWV established a new subsidiary (“Monaco SpinCo Inc.”) to which it conveyed Mead C&OP in return fora $460.0 million payment. The shares of Monaco SpinCo Inc. were then distributed to MWV's shareholders22Table of Contentsas a dividend. Immediately after the spin-off and distribution, a newly formed subsidiary of the Company merged with and into Monaco SpinCo Inc. andMWV shareholders effectively received in the stock dividend and subsequent conversion approximately one share of ACCO Brands common stock for everythree shares of MWV they held. Fractional shares were paid in cash. The subsidiary company subsequently merged with Mead Products LLC (“MeadProducts”), the surviving corporate entity, which is a wholly-owned subsidiary of ACCO Brands Corporation. As of December 31, 2012, $30.5 million has been received back from MWV through working capital adjustments to the purchase price.For accounting purposes, the Company was the acquiring enterprise. The Merger was accounted for as a purchase business combination. Accordingly,the results of Mead C&OP are included in the Company's consolidated financial statements from the date of the Merger. In connection with this transaction, inthe years ended December 31, 2012 and 2011, we incurred expenses of $22.9 million and $5.6 million, respectively, related to the transaction, includingintegration costs.On May 1, 2012, we entered into a refinancing in conjunction with the Merger. The refinancing transactions reduced our effective interest rate whileincreasing our borrowing capacity and extending the maturities of our credit facilities.The new credit facilities and notes are as follows:•$250 million of U.S. Dollar Senior Secured Revolving Credit Facilities due May 2017•$285 million of U.S. Dollar Senior Secured Term Loan A due May 2017•C$34.5 million of Canadian Dollar Senior Secured Term Loan A due May 2017•$450 million of U.S. Dollar Senior Secured Term Loan B due May 2019•$500 million of U.S. Dollar Senior Unsecured Notes due May 2020Interest rates under the senior secured term loans are based on the London Interbank Offered Rate (LIBOR). The range of borrowing costs under thepricing grid is LIBOR plus 3.00% for the Term A loans and LIBOR plus 3.25% with a LIBOR rate floor of 1.00% for the Term B loans. The senior securedcredit facilities had a weighted average interest rate of 3.89% as of December 31, 2012 and the senior unsecured notes have an interest rate of 6.75%.In addition, on May 1, 2012, we repurchased or discharged all of our outstanding senior secured notes of $425.1 million, due March 2015, for $464.7million including a premium and related fees of $39.6 million. On May 4, 2012, we redeemed all of our outstanding senior subordinated notes of $246.3million, due August 2015, for $252.6 million including a premium of $6.3 million. We also terminated our senior secured asset-based revolving creditfacility of $175.0 million, which was undrawn as of May 1, 2012. Associated with these transactions were $15.5 million in write-offs for original issuediscount and debt origination costs.In conjunction with our refinancing, we paid $38.5 million in additional bank, legal and advisory fees associated with our new credit facilities. Thesefees were capitalized and will be amortized over the life of the credit facilities and senior unsecured notes.During 2012, we voluntarily repaid $200.3 million of our debt comprising $64.2 million of our U.S. Dollar Senior Secured Term Loan A, $12.9million of our Canadian Dollar Senior Secured Term Loan A and $123.2 million of our U.S. Dollar Senior Secured Term Loan B.As part of the inclusion of Mead C&OP 's financial results with those of the Company, certain information technology costs associated with themanufacturing and distribution operations have been reclassified from advertising, selling, general and administrative expenses (SG&A) to cost of productssold. This reclassification was done to enable the financial results of the two businesses to be consistent and to better reflect those costs associated with the costof products sold. All prior periods have been reclassified to make the results comparable. For the years ended December 31, 2011 and 2010 reclassified coststotaled $15.5 million and $14.6 million, respectively. These historical reclassifications have had no effect on net income.Discontinued OperationsAs of May 31, 2011, we disposed of the GBC Fordigraph Pty Ltd (“GBC Fordigraph”) business. The Australia-based business was formerly part ofthe ACCO Brands International segment and the results of operations are included in the financial statements as a discontinued operation for all periodspresented. GBC Fordigraph represented $45.9 million in annual net sales for the year ended December 31, 2010. In 2011, we received net proceeds of $52.9million and recorded a gain on the sale of $41.9 million ($36.8 million after-tax).23Table of ContentsFor further information on the Company’s discontinued operations see Note 19, Discontinued Operations, to the consolidated financial statementscontained in Item 8 of this report.Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financialstatements of ACCO Brands Corporation and the accompanying notes contained therein. Unless otherwise noted, the following discussion pertains only to ourcontinuing operations.Adjustments Subsequent to the Earnings Release Filed on Form 8-K on February 13, 2013On February 21, 2013, in connection with completing our 2012 audited financial statements for filing in this report, we determined that the Companyshould record a reserve in the amount of $44.5 million in consideration of a contingent liability related to a tax assessment issued in December 2012 by theFederal Revenue Department of the Ministry of Finance of Brazil against the Company's newly acquired indirect subsidiary, Tilibra Produtos de PapelariaLtda. ("Tilibra"). Of the total reserve recorded, $43.3 million was an adjustment to the allocation of the purchase price for the fair value of non-currentliabilities assumed as of the acquisition date and was recorded as an increase to goodwill and the remaining $1.2 million was charged to current income taxexpense and represents additional interest that has accumulated since the date of the acquisition. One additional revision resulted in a reduction of both deferredtax liabilities and goodwill of $9.9 million. These adjustments were recorded as the Company continues its process of finalizing the purchase price allocationfor the Merger. For further information see Note 3, Acquisitions, to the consolidated financial statements contained in Item 8 of this report.The Company also recorded an additional tax expense of $2.9 million reflecting an adjustment to the deferred tax expense to reflect a change in certain taxrates for which deferred taxes have previously been provided in other comprehensive income (loss).The net effect of these changes was to reduce the Company's previously reported net income for the twelve months ended December 31, 2012 as includedon the Form 8-K filed on February 13, 2013 by $4.1 million to $115.4 million, reduce earnings per diluted share by $0.04 to $1.20 per diluted share andincrease our previously reported net loss for the three months ended December 31, 2012 by $4.1 million to $16.6 million or by $0.04 per diluted share to$0.15 loss per diluted share. There was no change to the amount of pretax income previously reported.Overview of Company PerformanceACCO Brands’ results are dependent upon a number of factors affecting sales, including pricing and competition. Historically, key drivers of demandin the office and school products industries have included trends in white collar employment levels, enrollment levels in education, gross domestic product(GDP) and growth in the number of small businesses and home offices together with usage of personal computers. Pricing and demand levels for officeproducts have also reflected a substantial consolidation within the global resellers of office products. This consolidation has led to multiple years of industrypricing pressure and a more efficient level of asset utilization by customers, resulting in lower sales pricing and volume for suppliers of office products. InFebruary 2013, two of our largest customers, Office Depot and Office Max, announced that they have entered into a merger agreement. While managementcurrently expects that the effects on our business of the proposed merger, if consummated, would be realized primarily in our retail channel, which onlyrepresents approximately one-third of our business with these customers, there can be no assurance that the combination of these two large customers will notadversely affect our business and results of operations. See “Risk Factors - Our customers may further consolidate, which could adversely impact ourmargins and sales."With 45% of revenues for the year ended December 31, 2012 arising from foreign operations, exchange rate fluctuations can play a major role in ourreported results. Foreign currency fluctuations impact the business in two ways: 1) the translation of our foreign operations results into U.S. dollars: a weakU.S. dollar benefits us and a strong U.S. dollar reduces the dollar-denominated contribution from foreign operations; and 2) the impact of foreign currencyfluctuations on cost of goods sold. Approximately half of the products we sell worldwide are sourced from Asia, and are paid for in U.S. dollars. However,our international operations sell in their local currency and are exposed to their domestic currency movements against the U.S. dollar. A strong U.S. dollar,therefore, increases our cost of goods sold and a weak U.S. dollar decreases our cost of goods sold for our international operations.We respond to these market changes by adjusting selling prices, but this response can be difficult during periods of rapid fluctuation. A significantportion of our foreign-currency cost of goods purchases is hedged with forward foreign currency contracts, which delays the economic effect of a fluctuatingU.S. dollar helping us align our market pricing. The financial impact on our business from foreign exchange movements for our cost of goods is also furtherdelayed until the inventory is sold. Foreign exchange exposures impact the business at different times: the translation of results is impacted immediately whenthe exchange24Table of Contentsrates move, whereas the impact on cost of goods is typically delayed due to a combination of currency hedging strategies and our inventory cycle.The cost of certain commodities used to make products increased significantly, during 2011, negatively impacting cost of goods, mainly for productssold in the second half of the year. We implemented price increases in the first and third quarters of 2011 to offset these cost increases. As commodity costscontinued to rise, in the first quarter of 2012, we implemented price increases in a limited number of markets in an effort to further offset increases incommodity costs. We continue to monitor commodity costs and work with suppliers and customers to negotiate balanced and fair pricing that best reflects thecurrent economic environment.During the first quarter of 2012, we committed to new cost savings plans intended to improve the efficiency and effectiveness of our businesses. Thecost savings activities are principally in the U.S. and the U.K. We believe these actions will benefit our efforts to improve profitability and enhanceshareholder value. These actions are expected to result in approximately $8 million in annualized cost savings when fully realized. In connection with theseactions, we incurred pretax charges, principally employee termination and severance costs, of approximately $7 million in 2012, substantially all of whichwere recorded in the six months ending June 30, 2012. Cash costs related to these charges, net of asset sale proceeds, are expected to be approximately $5million, which we substantially recovered in savings in the second half of 2012. During the year ended December 31, 2012, we received proceeds of $2.7million related to the sale of a facility in the U.K.The actions described in the preceding paragraph were independent of and not a part of any plan of integration related to our acquisition of Mead C&OP.In the second quarter of 2012, we committed to cost savings plans largely related to the consolidation and integration of Mead C&OP. The largest plan,which is expected to result in employee severance charges of approximately $11 million, is related to our dated goods business and involves closing a facilityin East Texas, Pennsylvania during March 2013 and relocating its activities. We expect to realize cash savings equal to the cash cost by the end of 2014. TheEast Texas facility is owned by us and will be marketed for sale. However, current real estate market conditions make a future sale date uncertain andtherefore the foregoing estimates do not reflect potential cash sale proceeds from the sale of the facility. The remaining plans are primarily related to eliminatingduplication in the management advertising, selling, general and administrative structures in the U.S. and Canada. Between now and the fourth quarter of2013, we anticipate additional restructuring charges of approximately $25 million, of which approximately $4 million are non-cash charges. These chargesrelate to cost-reduction initiatives in the company's European and North American operations and are associated with the completion of the Mead integrationand productivity initiatives. The cash component of the charge will approximate $15 million in 2013 and $6 million in 2014.In the first quarter of 2011, we initiated plans to rationalize our European operations. The associated costs primarily related to employee terminations,which were accounted for as regular business expenses in selling, general and administrative expenses and were primarily incurred in the first half of 2011.These were largely offset by associated savings realized in the second half of 2011. These costs totaled $4.5 million during the year ended December 31, 2011.We fund our liquidity needs for capital investment, working capital and other financial commitments through cash flow from continuing operations andour $250.0 million senior secured revolving credit facility. Based on our borrowing base, as of December 31, 2012, $238.5 million remained available forborrowing under this facility.During 2009, we determined that it was no longer more likely than not that our U.S. deferred tax assets would be realized, and as a result, we recorded anon-cash charge of $108.1 million to establish a valuation allowance against our U.S. deferred tax assets. Due to the acquisition of Mead C&OP in the secondquarter of 2012, we analyzed our need for maintaining valuation reserves against the expected U.S. future tax benefits. Based on our analysis we determinedthat there existed sufficient evidence in the form of future taxable income from the combined operations to release $126.1 million of the valuation allowancethat had been previously recorded against the U.S. deferred income tax assets. The resulting deferred tax assets are comprised principally of net operating losscarry-forwards, that are expected to be fully realized within the expiration period and other temporary differences.25Table of ContentsFiscal 2012 versus Fiscal 2011The following table presents the Company’s results for the years ended December 31, 2012 and 2011. Year Ended December 31, Amount of Change (in millions of dollars)2012 2011 $ % Net sales$1,758.5 $1,318.4 $440.1 33 % Cost of products sold1,225.1 919.2 305.9 33 % Gross profit533.4 399.2 134.2 34 % Gross profit margin30.3% 30.3% 0.0pts Advertising, selling, general and administrative expenses349.9 278.4 71.5 26 % Amortization of intangibles19.9 6.3 13.6 NM Restructuring charges (income)24.3 (0.7) 25.0 NM Operating income139.3 115.2 24.1 21 % Operating income margin7.9% 8.7% (0.8)pts Interest expense, net89.3 77.2 12.1 16 % Equity in earnings of joint ventures(6.9) (8.5) (1.6) (19)% Other expense, net61.3 3.6 57.7 NM Income tax (benefit) expense(121.4) 24.3 (145.7) NM Effective tax rateNM 56.6% NM Income from continuing operations117.0 18.6 98.4 NM Income (loss) from discontinued operations, net of income taxes(1.6) 38.1 (39.7) (104)% Net income115.4 56.7 58.7 NM Net SalesNet sales increased $440.1 million, or 33%, to $1.76 billion compared to $1.32 billion in the prior-year period. The acquisition of Mead C&OPcontributed sales of $551.5 million. The underlying decline of $111.4 million includes an unfavorable currency translation of $17.1 million, or 1%. Theremaining decline of $94.3 million, or 7%, occurred primarily in the International and North America business segments.International segment sales declined $61 million (excluding the effect of Mead C&OP and currency translation) of which the decline in the Europeanbusiness accounted for $56 million. Approximately $32 million of the European decline was due to the Company's decision to re-focus on more profitablebusiness; the remainder of the European decline was due to the weak economic environment. Australia also experienced weak consumer demand and lowerprice points.North American segment sales declined $27 million (excluding the effect of Mead C&OP and currency translation). Approximately half of the salesdecline was in the direct channel, which services large U.S. print finishing customers, with the remainder mainly from lower Canadian sales and declines inthe calendar business.Cost of Products SoldCost of products sold includes all manufacturing, product sourcing and distribution costs, including depreciation related to assets used in themanufacturing, procurement and distribution process, allocation of certain information technology costs supporting those processes, inbound and outboundfreight, shipping and handling costs, purchasing costs associated with materials and packaging used in the production processes. Cost of products soldincreased $305.9 million, or 33%, to $1.23 billion. The acquisition of Mead C&OP contributed $355.8 million, which includes $13.3 million inamortization of the acquisition step-up in inventory value. Excluding the impact of Mead C&OP acquisition, the principal drivers of the underlying decline of$49.9 million were lower sales volumes and a $12.1 million impact of favorable currency translation.As part of the inclusion of Mead C&OP's financial results with those of the Company, certain information technology costs associated with themanufacturing and distribution operations have been reclassified from advertising, selling, general and administrative expenses to cost of products sold. Thisreclassification was done to enable the financial results of the two businesses to be consistent and to better reflect those costs associated with the cost ofproducts sold. All prior periods have been reclassified26Table of Contentsto make the results comparable. For the year ended December 31, 2011, reclassified costs totaled $15.5 million. These historical reclassifications were notmaterial and had no effect on net income.Gross ProfitManagement believes that gross profit and gross profit margin provide enhanced shareholder understanding of underlying profit drivers. Gross profitincreased $134.2 million, or 34%, to $533.4 million. The acquisition of Mead C&OP contributed $195.7 million, which includes a $13.3 million charge forthe acquisition step-up in inventory value. The principal drivers of the underlying decline of $61.5 million were lower sales volumes and a $5.0 millionimpact of unfavorable currency translation. Gross profit margin was unchanged at 30.3%. The inclusion of Mead C&OP, which has a mix of relatively highermargin products, was offset by an adverse sales mix in the legacy ACCO Brands businesses and the charge for the acquisition step-up in inventory value.SG&A (Advertising, selling, general and administrative expenses)Advertising, selling, general and administrative expenses (SG&A) include advertising, marketing, selling (including commissions), research anddevelopment, customer service, depreciation related to assets outside the manufacturing and distribution processes and all other general and administrativeexpenses outside the manufacturing and distribution functions (e.g., finance, human resources, etc.). SG&A increased $71.5 million, or 26%, to $349.9million, and as a percentage of sales, SG&A decreased to 19.9% from 21.1% in the prior-year period. The acquisition of Mead C&OP contributed $77.9million of the increase. The underlying decrease of $6.4 million was driven by savings in the North America and International business segments and theabsence of $4.5 million of business rationalization charges within our European operations incurred during 2011 as well as favorable currency translation of$2.6 million, partially offset by $22.9 million in transaction and integration costs associated with the acquisition of Mead C&OP.Restructuring ChargesEmployee termination and severance charges included in restructuring charges primarily relate to our plans for integration with Mead C&OP that wereinitiated in the second quarter of 2012. These charges were $24.3 million in the current year period compared to income of $0.7 million in the prior-year perioddue to the release of reserves related to prior projects no longer required. The current year period charges primarily relate to consolidation and integration of therecently acquired Mead C&OP business, but also include certain cost savings plans that are expected to improve the efficiency and effectiveness of our U.S.and European businesses.Operating IncomeOperating income increased $24.1 million, or 21%, to $139.3 million and as a percentage of sales operating income declined to 7.9% from 8.7%. Theacquisition of Mead C&OP increased operating income by $101.2 million. The underlying decline of $77.1 million was driven by $24.3 million inrestructuring costs, $22.9 million in transaction and integration costs associated with the acquisition of Mead C&OP, a $13.3 million charge for theacquisition step-up in inventory value, lower sales volume in the legacy ACCO Brands businesses and unfavorable currency translation of $2.2 million.Savings in the North America and International business segments and the absence of $4.5 million of business rationalization charges within our Europeanoperations incurred during 2011 partially offset the underlying decline.Interest Expense, Net, Equity in Earnings of Joint Ventures and Other Expense, NetInterest expense was $89.3 million compared to $77.2 million in the prior-year period. The increase was due to merger-related expenses for the committedfinancing required for the Merger of $16.4 million and accelerated amortization of debt origination costs of $3.6 million. The underlying decrease was due toour refinancing completed in May 2012 which substantially lowered our effective interest rate. Also, 2011 includes $1.2 million of accelerated amortization ofdebt origination costs resulting from debt repayments in the third quarter of 2011.Equity in earnings of joint ventures was income of $6.9 million compared to $8.5 million in the prior-year period. During the fourth quarter of 2012we took an impairment charge of $1.9 million related our Neschen GBC Graphics Films, LLC ("Neschen")joint venture. The Company has committed at theend of 2012 to pursue an exit strategy with regards to Neschen, due to significant excess capacity and other opportunities to reduce our costs of productssourced from Neschen.Other expense, net, was $61.3 million compared to expense of $3.6 million in the prior year period. The significant increase was due to the refinancingof our debt in May 2012. The Company repurchased or discharged all of its outstanding Senior Secured Notes of $425.1 million, due March 2015, for$464.7 million including a premium and related fees of $39.6 million, and redeemed27Table of Contentsall of its outstanding Senior Subordinated Notes of $246.3 million, due August 2015, for $252.6 million including a premium of $6.3 million. The increasewas also due to the write-off of debt origination costs of $15.5 million related to the refinanced debt. In the prior year we paid $3.0 million in premiums on therepurchase of $34.9 million of our Senior Secured Notes. Income TaxesIncome tax benefit from continuing operations was $121.4 million on a loss before taxes of $4.4 million compared to an income tax expense fromcontinuing operations of $24.3 million on income before taxes of $42.9 million in the prior-year period. The tax benefit for 2012 is primarily due to the releaseof certain valuation allowances for the U.S. of $126.1 million and certain foreign jurisdictions in the amount of $19.0 million. The high effective tax rate for2011 of 56.6% is due to no tax benefit being provided on losses incurred in the U.S. and certain foreign jurisdictions where valuation reserves are recordedagainst future tax benefits. For a further discussion of income taxes and the release of the valuation allowances see Note 11 Income Taxes, to the consolidatedfinancial statements contained in Item 8 of this report.Income from Continuing OperationsIncome from continuing operations was $117.0 million, or $1.22 per diluted share, compared to income of $18.6 million, or $0.32 per diluted share inthe prior-year.Income (loss) from Discontinued OperationsLoss from discontinued operations was $1.6 million, or $0.02 per diluted share, compared to income of $38.1 million, or $0.66 per diluted share inthe prior-year.Discontinued operations include the results of GBC Fordigraph, which was sold during the second quarter of 2011, and the commercial print finishingbusiness, which was sold during 2009. For a further discussion of discontinued operations see Note 19, Discontinued Operations, to the consolidatedfinancial statements contained in Item 8 of this report.The components of discontinued operations for the years ended December 31, 2012 and 2011 are as follows:(in millions of dollars)2012 2011Income from operations before income taxes$— $2.5Gain (loss) on sale before income taxes(2.1) 41.5Provision (benefit) for income taxes(0.5) 5.9Income (loss) from discontinued operations$(1.6) $38.1Net IncomeNet income was $115.4 million, or $1.20 per diluted share, compared to net income of $56.7 million, or $0.98 per diluted share, in the prior year.28Table of ContentsSegment Discussion Year Ended December 31, 2012 Amount of Change Net Sales SegmentOperatingIncome (A) OperatingIncome Margin AdjustedCharges (B) Net Sales Net Sales SegmentOperatingIncome SegmentOperatingIncome MarginPoints (in millions of dollars) $ % $ % ACCO Brands North America$1,028.2 $86.2 8.4% $37.2 $405.1 65% $48.8 130 % 240ACCO Brands International551.2 62.0 11.2% 5.2 46.2 9% 3.1 5 % (50)Computer Products Group179.1 35.9 20.0% 0.3 (11.2) (6)% (11.2) (24)% (480)Total segment sales$1,758.5 $184.1 $440.1 $40.7 Year Ended December 31, 2011 Net Sales SegmentOperatingIncome (A) OperatingIncome Margin AdjustedCharges (B) (in millions of dollars) ACCO Brands North America$623.1 $37.4 6.0% $— ACCO Brands International505.0 58.9 11.7% — Computer Products Group190.3 47.1 24.8% — Total segment operating income$1,318.4 $143.4 (A) Segment operating income excludes corporate costs; Interest expense, net; Equity in earnings of joint ventures and Other expense, net. See Note 16,Information on Business Segments, to the consolidated financial statements contained in Item 8 of this report for a reconciliation of total segment operatingincome to income from continuing operations before income taxes.(B) Adjusted charges include restructuring charges for 2012 and non-recurring charges related to the Merger.ACCO Brands North AmericaACCO Brands North America net sales increased $405.1 million, or 65%, to $1.03 billion, compared to $623.1 million in the prior-year period. Theacquisition of Mead C&OP contributed sales of $432.6 million. The remaining decline of $27.5 million includes an unfavorable currency translation of $0.9million. The comparable decline (exclusive of currency translation) of $26.6 million, or 4%, occurred in the legacy ACCO Brands U.S. and Canadianbusinesses due to lower demand from large print finishing customers, weak demand including lower customer inventories and declines in the calendarbusiness. ACCO Brands North Americas operating income increased $48.8 million, or 130%, to $86.2 million, and operating income margin increased to 8.4%from 6.0% in the prior-year period. The acquisition of Mead C&OP contributed $81.4 million, net of other charges consisting of $11.5 million inamortization of the acquisition step-up in inventory value and $2.2 million of restructuring charges. The underlying decrease of $32.6 million was driven by$23.5 million of other charges, consisting of $18.4 million of restructuring charges, $5.1 million of integration charges, as well as, lower sales andunfavorable product mix (higher sales of low-margin products). This was partially offset by savings within SG&A. ACCO Brands InternationalACCO Brands International net sales increased $46.2 million, or 9%, to $551.2 million compared to $505.0 million in the prior-year period. Theacquisition of Mead C&OP contributed sales of $118.9 million. The remaining decline of $72.7 million includes an unfavorable currency translation of$11.9 million, or 2%. The comparable decline (exclusive of currency translation) was $60.8 million, or 12%. Of this decline, Europe accounted for $56million - of which approximately $32 million was anticipated from our previously announced plans to restructure the business and focus on more profitableproducts, channels and/or geographic markets. The remaining $24 million in European sales decline together with an $11 million decline in our Australiansales was due to weak consumer demand, lower pricing, customer focus on lower-price-point items and share loss to our customers' directly sourced openingprice point items. We achieved some modest growth in the legacy Latin American business that partially offset the declines noted above.ACCO Brands International operating income increased $3.1 million, or 5%, to $62.0 million, and operating income margin decreased to 11.2% from11.7% in the prior-year period. The acquisition of Mead C&OP contributed $19.8 million, net of other29Table of Contentscharges consisting of $1.8 million in amortization of the acquisition step-up in inventory value. Europe also incurred $3.4 million in restructuring charges,primarily during the first quarter of 2012. The remaining decrease of $13.3 million in operating income was primarily driven by lower sales volume andpricing in Australia. The European business largely offset its substantial top-line decline through cost reductions.Computer Products GroupComputer Products net sales decreased $11.2 million, or 6%, to $179.1 million compared to $190.3 million in the prior-year period. Unfavorableforeign currency translation decreased sales by $4.3 million, or 2%. The remaining decrease primarily reflects lower net pricing due to promotions and the lossof $3.2 million in royalty income. Volume increased slightly as sales of new products for smartphones and tablets offset lower sales of PC accessories,including high-margin PC security products.Operating income decreased $11.2 million, or 24%, to $35.9 million, and operating margin decreased to 20.0% from 24.8%. The decrease wasprimarily due to lower pricing, loss of royalty income and unfavorable product mix, impacted by the lower security product volume as noted above.Fiscal 2011 versus Fiscal 2010The following table presents the Company’s results for the years ended December 31, 2011, and 2010. Year Ended December 31, Amount of Change (in millions of dollars)2011 2010 $ % Net sales$1,318.4 $1,284.6 $33.8 3 % Cost of products sold919.2 902.0 17.2 2 % Gross profit399.2 382.6 16.6 4 % Gross profit margin30.3% 29.8% 0.5pts Advertising, selling, general and administrative expenses278.4 266.7 11.7 4 % Amortization of intangibles6.3 6.7 (0.4) (6)% Restructuring income(0.7) (0.5) (0.2) (40)% Operating income115.2 109.7 5.5 5 % Operating income margin8.7% 8.5% 0.2pts Interest expense, net77.2 78.3 (1.1) (1)% Equity in earnings of joint ventures(8.5) (8.3) 0.2 2 % Other expense, net3.6 1.2 2.4 200 % Income tax expense24.3 30.7 (6.4) (21)% Effective tax rate56.6% 79.7% NM Income from continuing operations18.6 7.8 10.8 NM Income from discontinued operations, net of income taxes38.1 4.6 33.5 728 % Net income56.7 12.4 44.3 NM Net SalesNet sales increased $33.8 million, or 3%, to $1.32 billion, primarily due to translation gains from the U.S. dollar weakening relative to the prior-yearperiod, which favorably impacted sales by $39.8 million, or 3%. Underlying sales declined modestly as lower volume in the International and Americassegments were partially offset by higher pricing and volumes gains in the Computer Products segment.Cost of Products SoldCost of products sold includes all manufacturing, product sourcing and distribution costs, including depreciation related to assets used in themanufacturing, procurement and distribution process, allocation of certain information technology costs supporting those processes, inbound and outboundfreight, shipping and handling costs, purchasing costs associated with materials and packaging used in the production processes. Cost of products soldincreased $17.2 million, or 2% to $919.2 million. The30Table of Contentsincrease reflects the impact of unfavorable currency translation of $25.8 million as well as higher commodity and fuel costs, which were partially offset bylower sales volume and improved manufacturing, freight and distribution efficiencies.As part of the inclusion of Mead C&OP's financial results with those of the Company, certain information technology costs associated with themanufacturing and distribution operations have been reclassified from advertising, selling, general and administrative expenses to cost of products sold. Thisreclassification was done to enable the financial results of the two businesses to be consistent and to better reflect those costs associated with the cost ofproducts sold. All prior periods have been reclassified to make the results comparable. For the years ended December 31, 2011 and 2010, reclassified coststotaled $15.5 million and $14.6 million, respectively. These historical reclassifications were not material and had no effect on net income.Gross ProfitManagement believes that gross profit and gross profit margin provide enhanced shareholder appreciation of underlying profit drivers. Gross profitincreased $16.6 million, or 4%, to $399.2 million. The increase in gross profit was primarily due to the benefit from favorable currency translation of $14.0million. Gross profit margin increased to 30.3% from 29.8%, primarily due to improved freight and distribution efficiencies, particularly in Europe.SG&A (Advertising, selling, general and administrative expenses)SG&A expenses include advertising, marketing, selling (including commissions), research and development, customer service, depreciation related toassets outside the manufacturing and distribution processes and all other general and administrative expenses outside the manufacturing and distributionfunctions (e.g., finance, human resources, etc.). SG&A increased $11.7 million, or 4%, to $278.4 million, of which currency translation contributed $6.8million of the increase. SG&A as a percentage of sales increased to 21.1% from 20.8% . This increase was due to $5.6 million in costs associated with thepending acquisition of Mead C&OP. Business rationalization charges of $4.5 million, primarily incurred in the first quarter of 2011, were offset by savingsduring the rest of the 2011.Operating IncomeOperating income increased $5.5 million, or 5%, to $115.2 million, and as a percentage of sales, operating income increased modestly to 8.7% from8.5%. The increase in operating income was driven by $7.0 million of favorable currency translation and improved gross margins, partially offset by theSG&A cost increases described above.Interest Expense, Net and Other Expense, NetInterest expense was $77.2 million compared to $78.3 million in the prior-year. The decrease in interest was due to repurchases of our Senior SecuredNotes and Senior Subordinated Notes totaling $34.9 million and $25.0 million, respectively, as well as lower borrowings under our revolving credit facilityduring the year. This reduction was partially offset by the acceleration of debt origination amortization costs resulting from bond repurchases of $1.2 million.Other expense was $3.6 million compared to $1.2 million in the prior-year period. The increase was due to $3.0 million of premium paid on therepurchase of $34.9 million of the Senior Secured Notes, partially offset by lower foreign exchange losses in the current year.Income TaxesIncome tax expense from continuing operations was $24.3 million on income before taxes of $42.9 million compared to an income tax expense fromcontinuing operations of $30.7 million on income before taxes of $38.5 million in the prior year. The high effective tax rates for 2011 and 2010 are due to notax benefit being provided on losses incurred in the U.S. and certain foreign jurisdictions where valuation reserves are recorded against future tax benefits.Included in the 2011 amount is a $2.8 million benefit from the reversal of a valuation reserve in the U.K. Included in the 2010 amount is an $8.6 millionexpense recorded to reflect the tax impact of foreign currency fluctuations on an intercompany debt obligation, partially offset by the benefit of a $2.8 millionout-of-period adjustment to increase deferred tax assets of a non-U.S. subsidiary.Income from Continuing OperationsIncome from continuing operations was $18.6 million, or $0.32 per diluted share, compared to income of $7.8 million, or $0.14 per diluted share in theprior-year period.31Table of ContentsIncome from Discontinued OperationsIncome from discontinued operations was $38.1 million, or $0.66 per diluted share, compared to income of $4.6 million, or $0.08 per diluted share inthe prior-year period.Discontinued operations include the results of GBC Fordigraph, which was sold during the second quarter of 2011, and the commercial print finishingbusiness, which was sold during 2009. For a further discussion of discontinued operations see Note 19, Discontinued Operations, to the consolidatedfinancial statements contained in Item 8 of this report.The components of discontinued operations for the years ended December 31, 2011 and 2010 are as follows: (in millions of dollars)2011 2010Income from operations before income tax$2.5 $6.6Gain (loss) on sale before income tax41.5 (0.1)Income tax expense5.9 1.9Income from discontinued operations$38.1 $4.6Net IncomeNet income was $56.7 million, or $0.98 per diluted share, compared to net income of $12.4 million, or $0.22 per diluted share, in the prior-yearperiod.Segment Discussion Year Ended December 31, 2011 Amount of Change Net Sales SegmentOperatingIncome (A) OperatingIncome Margin Net Sales Net Sales SegmentOperatingIncome SegmentOperatingIncome Margin Points (in millions of dollars) $ % $ % ACCO Brands North America$623.1 $37.4 6.0% $(8.5) (1)% $(6.8) (15)% (100)ACCO Brands International505.0 58.9 11.7% 29.0 6% 15.3 35 % 250Computer Products Group190.3 47.1 24.8% 13.3 8% 4.1 10 % 50Total segment sales$1,318.4 $143.4 $33.8 $12.6 Year Ended December 31, 2010 Net Sales SegmentOperatingIncome (A) OperatingIncome Margin (in millions of dollars) ACCO Brands North America$631.6 $44.2 7.0% ACCO Brands International476.0 43.6 9.2% Computer Products Group177.0 43.0 24.3% Total segment operating income$1,284.6 $130.8 (A) Segment operating income excludes corporate costs; Interest expense, net; Equity in earnings of joint ventures and Other expense, net. See Note 16,Information on Business Segments, to the consolidated financial statements contained in Item 8 of this report for a reconciliation of total segment operatingincome to income from continuing operations before income taxes.ACCO Brands North AmericaACCO Brands North America net sales decreased $8.5 million, or 1% to $623.1 million, compared to $631.6 million in the prior-year period. Foreigncurrency translation favorably impacted sales by $3.9 million. Sales volume declined 4%, primarily in the U.S. due to inventory management initiatives bycertain customers. The decline was partially offset by higher pricing and increased volumes in Canada.32Table of ContentsOperating income decreased $6.8 million, or 15%, to $37.4 million and included favorable foreign currency translation of $0.6 million. Operatingincome margin decreased to 6.0% from 7.0% in the prior-year period primarily due to the deleveraging of fixed costs due to lower sales volume.ACCO Brands InternationalACCO Brands International net sales increased $29.0 million, or 6%, to $505.0 million, compared to $476.0 million in the prior-year period. Theincrease was driven by foreign currency translation, which increased sales by $31.4 million, or 7%. Sales volume declined 3% due to weak European marketdemand, partially offset by European price increases and small volume gains in the Latin America and Asia-Pacific regions.Operating income increased $15.3 million, or 35%, to $58.9 million, including a $4.9 million benefit from foreign currency translation. Operatingincome margin increased to 11.7% from 9.2%, mainly due to the substantial improvements in European operations, resulting from higher pricing, improvedfreight and distribution efficiencies, as well as SG&A savings. Included in the net SG&A savings were $4.5 million of business rationalization chargeswithin Europe.Computer Products GroupComputer Products net sales increased $13.3 million, or 8%, to $190.3 million. The favorable impact from foreign currency translation increased salesby $4.5 million, or 3%. The remainder of the increase primarily reflects volume gains from sales of new accessory products for smartphones and tablets.Operating income increased $4.1 million, or 10%, to $47.1 million, resulting from a $1.5 million benefit from foreign currency translation, highervolume and lower SG&A expenses, partially offset by lower security product sales, which adversely impacted both margin and royalty income. Operatingincome margins increased to 24.8% from 24.3% primarily due to the favorable benefit from increased sales, partially offset by the adverse sales mix.Liquidity and Capital ResourcesOur primary liquidity needs are to service indebtedness, reduce our borrowing, fund capital expenditures and support working capital requirements.Our principal sources of liquidity are cash flows from operating activities, cash and cash equivalents held and seasonal borrowings under our senior securedrevolving credit facility. We maintain adequate financing arrangements at market rates. Because of the seasonality of our business we typically carry greatercash balances in the first, second and third quarters of our fiscal year. Lower cash balances are typically carried during the fourth quarter due to theabsorption of our Brazilian cash into working capital. Our Brazilian business is highly seasonal due to the combined impact of the back-to-school seasoncoinciding with the calendar year-end in the fourth quarter. Due to various tax laws, it is costly to transfer short-term working capital in and out of Brazil. Ournormal practice is therefore to hold seasonal cash requirements within Brazil, invested in Brazilian government securities. Our priority for all other cash flowuse over the near term, after funding internal growth, is debt reduction, and investment in new products through both organic development and acquisitions.Any available overseas cash, other than that held for working capital requirements in Brazil, is repatriated on a continuous basis. Undistributedearnings of foreign subsidiaries that are expected to be permanently reinvested and thus not available for repatriation, aggregate approximately $586 millionand $517 million as of December 31, 2012 and 2011, respectively. If these amounts were distributed to the U.S., in the form of a dividend or otherwise, wewould be subject to additional U.S. income taxes. Determination of the amount of unrecognized deferred income tax liabilities on these earnings is notpracticable.Refinancing TransactionsOn May 1, 2012 we entered into a refinancing in conjunction with the Merger.For further information on our refinancing see Introduction - Mead C&OP Merger and Debt Refinancing contained elsewhere in Item 7 of this report andNote 4, Long-term Debt and Short-term Borrowings, to the consolidated financial statements contained in Item 8 of this report.Loan CovenantsWe must meet certain restrictive financial covenants as defined under the senior secured credit facilities. The covenants become more restrictive over timeand require us to maintain certain ratios related to consolidated leverage and consolidated interest coverage. We are also subject to certain customary restrictivecovenants under the senior unsecured notes.33Table of ContentsThe table below sets forth the financial covenant ratio levels under the senior secured credit facilities: Maximum Consolidated LeverageRatio(1) Minimum - Interest CoverageRatio(2)May 1, 2012 to December 31, 2012 4.50:1.00 3.00:1.00January 1, 2013 to December 31, 2013 4.25:1.00 3.00:1.00January 1, 2014 to December 31, 2014 4.00:1.00 3.25:1.00January 1, 2015 to December 31, 2015 3.75:1.00 3.25:1.00January 1, 2016 and thereafter 3.50:1.00 3.50:1.00(1)The leverage ratio is computed by dividing our net funded indebtedness by the cumulative four-quarter-trailing EBITDA, which excludes restructuring,transaction costs, integration and other charges up to certain limits as well as other adjustments defined under the senior secured credit facilities.(2)The interest coverage ratio for any period is the cumulative four-quarter-trailing EBITDA, for the Company, for such period, adjusted as provided in(1), divided by cash interest expense for the Company for such period and other adjustments, all as defined under the senior secured credit facilities.The senior secured credit facilities contain customary events of default, including payment defaults, breach of representations and warranties, covenantdefaults, cross-defaults and cross-accelerations, certain bankruptcy or insolvency events, certain ERISA-related events, changes in control or ownership, andinvalidity of any loan document.The indenture governing the senior unsecured notes does not contain financial performance covenants. However, that indenture does contain covenantsthat limit, among other things, our ability and the ability of our restricted subsidiaries to:•incur additional indebtedness;•pay dividends on our capital stock or repurchase our capital stock;•enter into or permit to exist contractual limits on the ability of our subsidiaries to pay dividends to the Company;•enter into certain transactions with affiliates;•make investments;•create liens; and•sell certain assets or merge with or into other companies.Certain of these covenants will be subject to suspension when and if the notes are rated at least “BBB–” by Standard & Poor’s or at least “Baa3” byMoody’s. Each of the covenants is subject to a number of important exceptions and qualifications.See also Note 4, Long-term Debt and Short-term Borrowings, to the consolidated financial statements contained in Item 8 of this report.Compliance with Loan CovenantsAs of December 31, 2012 our Leverage Ratio was approximately 3.7 to 1 and the Interest Coverage was approximately 4.5 to 1. The amount available forborrowings under our revolving credit facilities was $238.5 million (allowing for $11.5 million of letters of credit outstanding on that date).As of and for the period ended December 31, 2012, we were in compliance with all applicable loan covenants.Guarantees and SecurityObligations under the senior secured credit facilities are guaranteed by certain of our existing and future domestic subsidiaries. In the case of theobligations of ACCO Brands Canada its Senior Secured Term Loan A is guaranteed by its future subsidiaries and by our other existing and future Canadiansubsidiaries.The senior unsecured notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of our existing andfuture domestic subsidiaries other than certain excluded subsidiaries. The senior unsecured notes and the related guarantees will rank equally in right ofpayment with all of the existing and future senior debt of the Company, Mead Products and the guarantors, senior in right of payment to all of the existing andfuture subordinated debt of the Company, Mead Products and the guarantors, and effectively subordinated to all of the existing and future securedindebtedness of the Company,34Table of ContentsMead Products and the guarantors to the extent of the value of the assets securing such indebtedness. The senior unsecured notes and the guarantees will bestructurally subordinated to all existing and future liabilities, including trade payables, of each of the Company's and Mead Products’ subsidiaries that do notguarantee the notes.Cash FlowFiscal 2012 versus Fiscal 2011Cash Flow from Operating ActivitiesFor the year ended December 31, 2012, cash used by operating activities was $7.5 million, compared to the cash provided in the prior-year period of$61.8 million. Net income for 2012 was $115.4 million, compared to $56.7 million in 2011. Non-cash and non-operating adjustments to net income on apre-tax basis in 2012 totaled $106.6 million, compared to $10.0 million in 2011. The 2012 net adjustments were substantially higher than 2011, largely dueto the inclusion of Mead C&OP in 2012 and the sale of GBC Fordigraph in 2011 which resulted in a pre-tax net gain of $41.9 million.The operating cash outflow in 2012 of $7.5 million for the year ended December 31, 2012 was driven by the May 1, 2012 timing of the Merger withMead C&OP, and only includes the cash flow from Mead C&OP since that date. The outflow includes cash payments of $16.1 million related to thetransaction and $61.6 million related to the associated debt extinguishment and refinancing. This was largely offset by cash generated from operating profits.The use of cash for net working capital was $117.0 million in 2012, and reflects a large seasonal investment in working capital for the Mead C&OPbusiness. The Mead business has a very seasonal cash flow pattern whereby strong sales during the fourth quarter result in substantial accounts receivable atthe end of the year and strong cash collections during the early part of the following year. As a result, nearly all of the Mead annual net cash generation occursduring the first quarter. The use of cash for accounts payable reflects lower inventory purchases, primarily for Mead C&OP, due to the seasonally lower salesvolume anticipated during the first quarter. Other significant cash payments in 2012 included interest payments of $79.3 million (excluding financing-relatedpayments), income tax payments of $28.8 million and contributions to the Company's pension and defined benefit plans of $19.2 million.The table below shows our cash flow from accounts receivable, inventories and accounts payable for the years ended December 31, 2012 and 2011,respectively: 2012 2011Accounts receivable $(153.8) $0.6Inventories 61.8 5.4Accounts payable (25.0) 16.8Cash flow (used by)/provided by net working capital $(117.0) $22.8Cash Flow from Investing ActivitiesCash used by investing activities was $423.2 million for the year ended December 31, 2012 and reflects $397.5 million of net cash paid for MeadC&OP. For additional information, see Note 3, Acquisitions, to the consolidated financial statements contained in Item 8 of this report. Cash provided byinvesting activities in 2011 was $40.0 million and included proceeds from the sale of GBC Fordigraph of $53.6 million. Capital expenditures were $30.3million and $13.5 million for the years ended December 31, 2012 and 2011, respectively. The increase in capital expenditures reflects the acquisition of MeadC&OP, as well as additional investments in information technology systems, including the cost of replacing the IT infrastructure previously supplied byMead C&OP's former parent company. During 2012, the Company also received net proceeds of $3.1 million from the sale of assets, which included amanufacturing facility located in the United Kingdom. In addition, $1.5 million of net proceeds associated with the 2009 sale of the Company’s formercommercial print finishing business were collected in 2012, while additional cash expenditures associated with the sale and exit of the business ofapproximately $2.4 million are anticipated during the 2013 year.Cash Flow from Financing ActivitiesCash provided by financing activities for the year ended December 31, 2012 was $360.1 million, and includes proceeds from new debt facilities of$1.27 billion, offset by repayments of the Company's extinguished and new debt facilities of $872.0 million and debt issuance payments of $38.5 million.Cash used by financing activities in 2011 was $63.1 million, primarily representing repayments of long-term debt.35Table of ContentsFiscal 2011 versus Fiscal 2010Cash Flow from Operating ActivitiesFor the year ended December 31, 2011, cash provided by operating activities was $61.8 million, compared to $54.9 million in the prior year. Netincome for 2011 was $56.7 million, compared to $12.4 million in 2010. Non-cash and non-operating adjustments to net income on a pre-tax basis in 2011totaled $10.0 million, compared to $46.2 million in 2010. The 2011 net adjustments were substantially lower than 2010, largely due to the sale of GBCFordigraph which resulted in a pre-tax net gain of $41.9 million.The table below shows our cash flow from accounts receivable, inventories and accounts payable for the years ended December 31, 2011 and 2010,respectively: 2011 2010Accounts receivable $0.6 $(18.5)Inventories 5.4 (9.8)Accounts payable 16.8 14.8Cash flow from net working capital $22.8 $(13.5)Operating cash flow in 2011 of $61.8 million was the result of the realization of income from operations and net working capital, partially offset by theuse of cash to fund income tax and interest payments and contributions to our pension plans. Compared to the prior year, accounts receivable levels reflectimproved customer collections and increased sales in the early part of the fourth quarter, which allowed us to collect more of our receivables before the end ofthe quarter. Inventory levels demonstrate improved supply chain management. Payments associated with the 2010 annual incentive plan of approximately $9million were made during the first quarter of 2011, compared to approximately $1 million in the prior year. Income tax payments were $27.7 million in 2011,compared to only $13.9 million in the 2010 period when we benefited from substantial refunds related to prior years and had lower operating profit. Interestpayments of $71.9 million were slightly higher than the prior year, while contributions to our pension plans of $13.5 million were slightly less than paymentsmade during the prior year. Payments associated with our wind-down of restructuring activities were $3.4 million, while European business rationalizationactivity resulted in payments of $4.2 million during 2011. In addition, the second half of 2011 included payments in pursuit of the Mead C&OP acquisitionof $4.8 million.During the 2010 year, a recurring pattern of strong sales during the final month of each quarter lead to high quarter-end accounts receivable balances. Inaddition, inventory levels increased due to higher commodity costs and in support of the sales growth anticipated during the first quarter of 2011.Cash Flow from Investing ActivitiesCash provided by investing activities was $40.0 million for the year ended December 31, 2011 and cash used was $14.9 million for the year endedDecember 31, 2010. The sale of GBC Fordigraph during the second quarter of 2011 generated net proceeds of $52.9 million, and approximately $5.4 millionof taxes associated with the sale were paid in 2012. We also received $0.6 million of net proceeds associated with the 2009 sale of our former commercial printfinishing business. Capital expenditures were $13.5 million and $12.6 million for the periods ended December 31, 2011 and 2010, respectively. Additionalcash payments of $1.4 million associated with the purchase of two minor product line acquisitions were also recognized during the first half of 2011.Cash Flow from Financing ActivitiesCash used by financing activities was $63.1 million and $0.1 million for the years ended December 31, 2011 and 2010, respectively. During 2011,principally during the third quarter, we repurchased $59.9 million of our Senior Subordinated Notes and Senior Secured Notes debt.CapitalizationWe had approximately 113.1 million common shares outstanding as of December 31, 2012.36Table of ContentsAdequacy of Liquidity SourcesWe are subject to credit risk relative to the ability of counterparties to meet their contractual payment obligations or the potential non-performance ofcounterparties to deliver contracted commodities or services at the contracted price. The impact of any global economic downturn and the ability of oursuppliers and customers to access credit markets is also unpredictable, outside of our control and may create additional risks for us, both directly andindirectly. The inability of suppliers to access financing or the insolvency of one or more of our suppliers could lead to disruptions in our supply chain,which could adversely impact our sales and/or increase our costs. Our suppliers may require us to pay cash in advance or obtain letters of credit for theirbenefit as a condition to selling us their products and services. If one or more of our principal customers were to file for bankruptcy, our sales could beadversely impacted and our ability to collect outstanding accounts receivable from any such customer could be limited. Any of these risks and uncertaintiescould have a material adverse effect on our business, financial condition, results of operations or cash flows.Based on our 2013 business plan and latest forecasts, we believe that cash flow from operations, our current cash balance and other sources ofliquidity, including borrowings available under our senior secured revolving credit facility will be adequate to support requirements for working capital,capital expenditures, and to service indebtedness for the foreseeable future. Our future operating performance is dependent on many factors, some of which arebeyond our control, including prevailing economic, financial and industry conditions.Our operating performance is dependent on our continued ability to access funds under our credit and loan agreements, including under our seniorsecured revolving credit facility and from cash on hand, maintain sales volumes, drive profitable growth, realize cost savings and generate cash fromoperations. The financial institutions that fund our senior secured revolving credit facility could also be impacted by any volatility in the credit markets, andif one or more of them could not fulfill our revolving credit requests, our operations may be adversely impacted. If our revolving credit is unavailable due to alender not being able to fund requested amounts, or because we have not maintained compliance with our covenants, or we do not meet our sales or growthinitiatives within the time frame we expect, our cash flow could be materially adversely impacted. A material decrease in our cash flow could cause us to fail tomeet our obligations under our borrowing arrangements. A default under our credit or loan agreements could restrict or terminate our access to borrowings andmaterially impair our ability to meet our obligations as they come due. If we do not comply with any of our covenants and thereafter we do not obtain a waiveror amendment that otherwise addresses that non-compliance, our lenders may accelerate payment of all amounts outstanding under the affected borrowingarrangements, which amounts would immediately become due and payable, together with accrued interest. Such acceleration would cause a default under theagreements governing the senior secured term loans and other agreements that provide us with access to funding. Any one or more defaults, or our inability togenerate sufficient cash flow from our operations in the future to service our indebtedness and meet our other needs, may require us to refinance all or a portionof our existing indebtedness or obtain additional financing or reduce expenditures that we deem necessary to our business. There can be no assurance that anyrefinancing of this kind would be possible or that any additional financing could be obtained. The inability to obtain additional financing could have amaterial adverse effect on our financial condition and on our ability to meet our obligations to noteholders.Our cash flows from operating activities are dependent upon a number of factors that affect our sales, including demand, pricing and competition.Historically, key drivers of demand in the office products industry have included economic conditions generally, and specifically trends in gross domesticproduct (GDP), which affects business confidence and the propensity to purchase consumer durables, white collar employment levels, and growth in thenumber of small businesses and home offices together with increasing usage of personal computers. Pricing and demand levels for office products have alsoreflected a substantial consolidation within the global resellers of office products, which is likely to continue. Those resellers are our principal customers. Thisconsolidation has led to increased pricing pressure on suppliers and a more efficient level of asset utilization by customers, resulting in lower sales volumesand higher costs from more frequent small orders for suppliers of office products. We sell products in highly competitive markets, and compete against largeinternational and national companies, regional competitors and against our own customers’ direct and private-label sourcing initiatives.For more information on these risks see “Risk Factors” in Item 1A of this report.Off-Balance-Sheet Arrangements and Contractual Financial ObligationsWe 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.37Table of ContentsOur contractual obligations and related payments by period at December 31, 2012 were as follows: 2013 2014 - 2015 2016 -2017 Thereafter Total(in millions of dollars) Contractual obligations Debt(1)$1.3 $52.3 $191.8 $826.7 $1,072.1Interest on debt(2)56.5 111.3 101.6 102.9 372.3Operating lease obligations21.0 34.0 25.5 48.4 128.9Purchase obligations(3)89.4 16.2 16.1 — 121.7Other long-term liabilities(4)14.3 — — — 14.3Total$182.5 $213.8 $335.0 $978.0 $1,709.3 (1)The required 2013, 2014 and some 2015 principal cash payments on the U.S. Dollar and Canadian Dollar Senior Secured Term Loans were made in2012.(2)Interest calculated at December 31, 2012 rates for variable rate debt.(3)Purchase obligations primarily consist of contracts and non-cancelable purchase orders for raw materials and finished goods.(4)Obligations related to the Company’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, 2012, we are unableto make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities. Therefore, $56.3 million of unrecognized taxbenefits have been excluded from the contractual obligations table above. See Note 11, Income Taxes, to the consolidated financial statements contained inItem 8 of this report for a discussion on income taxes.Critical Accounting PoliciesOur financial statements are prepared in conformity with accounting principles generally accepted in the U.S. Preparation of our financial statementsrequire us to make judgments, estimates and assumptions that affect the amounts of actual assets, liabilities, revenues and expenses presented for eachreporting period. Actual results could differ significantly from those estimates. We regularly review our assumptions and estimates, which are based onhistorical experience and, where appropriate, current business trends. We believe that the following discussion addresses our critical accounting policies,which require more significant, subjective and complex judgments to be made by our management.Revenue RecognitionWe recognize revenue from product sales when earned, net of applicable provisions for discounts, returns and allowances. We consider revenue to berealized or realizable and earned when all of the following criteria are met: title and risk of loss have passed to the customer, persuasive evidence of anarrangement exists, delivery has occurred, the price is fixed or determinable and collectability is reasonably assured. We also provide for our estimate ofpotential bad debt at the time of revenue recognition.Allowances for Doubtful Accounts and Sales ReturnsTrade receivables are recorded at the stated amount, less allowances for discounts, doubtful accounts and returns. The allowance for doubtful accountsrepresents estimated uncollectible receivables associated with potential customer defaults on contractual obligations, usually due to customers’ potentialinsolvency. The allowance includes amounts for certain customers where a risk of default has been specifically identified. In addition, the allowance includesa provision for customer defaults on a general formula basis when it is determined the risk of some default is probable and estimable, but cannot yet beassociated with specific customers. The assessment of the likelihood of customer defaults is based on various factors, including the length of time thereceivables 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 historical trends.In addition, the allowance includes a reserve for currently authorized customer returns that are considered to be abnormal in comparison to the historical basis.38Table of ContentsInventoriesInventories are priced at the lower of cost (principally first-in, first-out with minor amounts at average) or market. A reserve is established to adjust thecost of inventory to its net realizable value. Inventory reserves are recorded for obsolete or slow moving inventory based on assumptions about future demandand marketability of products, the impact of new product introductions and specific identification of items, such as product discontinuance orengineering/material changes. These estimates could vary significantly, either favorably or unfavorably, from actual requirements if future economicconditions, customer inventory levels or competitive conditions differ from expectations.Property, Plant and EquipmentProperty, 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 an asset, arecapitalized; maintenance and repair costs are expensed. Purchased computer software is capitalized and amortized over the software’s useful life. The followingtable shows estimated useful lives of property, plant and equipment: Buildings 40 to 50 years Leasehold improvements Lesser of lease term or the life of the asset Machinery, equipment and furniture 3 to 10 yearsLong-Lived AssetsWe test long-lived assets for impairment whenever events or changes in circumstances indicate that the assets’ carrying amount is not recoverable fromits undiscounted cash flows. When such events occur, we compare the sum of the undiscounted cash flows expected to result from the use and eventualdisposition of the asset or asset group to the carrying amount of a long-lived asset or asset group. The cash flows are based on our best estimate at the time offuture cash flow, derived from the most recent business projections. If this comparison indicates that there is an impairment, the amount of the impairment istypically calculated using discounted expected future cash flows. The discount rate applied to these cash flows is based on our weighted average cost ofcapital, computed by selecting market rates at the valuation dates for debt and equity that are reflective of the risks associated with an investment in theCompany’s industry as estimated by using comparable publicly traded companies.Intangible AssetsIntangible assets are comprised primarily of indefinite-lived intangible assets acquired and purchased intangible assets arising from the application ofpurchase accounting. Indefinite-lived intangible assets are not amortized, but are evaluated annually to determine whether the indefinite useful life isappropriate. Indefinite-lived intangibles are tested for impairment on an annual basis and written down when impaired. An interim impairment test isperformed if an event occurs or conditions change that would more likely than not reduce the fair value below the carrying value.In addition, purchased intangible assets other than goodwill are amortized over their useful lives unless their lives are determined to be indefinite. Certainof our trade names have been assigned an indefinite life as we currently anticipate that these trade names will contribute cash flows to ACCO Brandsindefinitely.We review indefinite-lived intangibles for impairment annually, normally in the second quarter, and whenever market or business events indicate theremay be a potential adverse impact on a particular intangible. We consider the implications of both external factors (e.g., market growth, pricing, competition,and technology) and internal factors (e.g., product costs, margins, support expenses, and capital investment) and their potential impact on cash flows for eachbusiness in both the near and long term, as well as their impact on any identifiable intangible asset associated with the business. Based on recent businessresults, 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 and futureexpectations, management considers whether the potential for impairment exists. Finite lived intangibles are amortized over 10, 15, 23 or 30 years.As part of our review in the second quarter of 2012, $21.4 million of the value previously assigned to one of our legacy indefinite-lived trade names waschanged to an amortizable intangible asset. The legacy indefinite-lived trade name was not impaired. The change was made in respect of decisions regardingour future use of the trade name. We commenced amortizing the trade name in June of 2012 on a prospective basis over a life of 30 years.39Table of ContentsGoodwillWe test goodwill for impairment at least annually, normally in the second quarter, and on an interim basis if an event or circumstance indicates that it ismore likely than not that an impairment has been incurred. If the carrying amount of the goodwill exceeds its fair value, an impairment loss is recognized.During 2012, we adopted ASU No. 2011-08, Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment. ASU No. 2011-08 permitsan entity to first assess qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount as abasis for determining whether it is necessary to perform the two-step goodwill impairment test included in U.S. GAAP. Entities are not required to calculate thefair value of a reporting unit unless they determine that it is more likely than not that the fair value is less than the carrying amount. We concluded it was notnecessary to apply the traditional two-step fair value quantitative impairment test in ASC 350 to any of our reporting units in 2012. When applying a fair-value-based test, estimates are made of the expected future cash flows to be derived from each reporting unit. The resulting fair value determination issignificantly impacted by estimates of future prices for our products, capital needs, economic trends and other factors.Given the current economic environment and the uncertainties regarding the impact on our business, there can be no assurance that our estimates andassumptions made for purposes of our qualitative impairment testing during 2012 will prove to be accurate predictions of the future. If our assumptionsregarding forecasted revenue or margin growth rates of certain reporting units are not achieved, we may be required to record impairment charges in futureperiods, whether in connection with our next annual impairment testing in the second quarter of fiscal year 2013 or prior to that, if any such change constitutesa triggering event outside of the quarter from when the annual impairment test is performed. It is not possible at this time to determine if any such futureimpairment charge would result or, if it does, whether such charge would be material.Employee Benefit PlansWe provide a range of benefits to our employees and retired employees, including pensions, post-retirement, post-employment and health care benefits.We record annual amounts relating to these plans based on calculations specified by accounting principles generally accepted in the U.S., which includevarious actuarial assumptions, including discount rates, assumed rates of return, compensation increases, turnover rates and health care cost trend rates.Actuarial assumptions are reviewed on an annual basis and modifications to these assumptions are made based on current rates and trends when it is deemedappropriate. As required by accounting principles generally accepted in the U.S., the effect of our modifications are generally recorded and amortized overfuture periods. We believe that the assumptions utilized in recording our obligations under the plans are reasonable based on our experience. The actuarialassumptions used to record our plan obligations could differ materially from actual results due to changing economic and market conditions, higher or lowerwithdrawal rates or other factors which may impact the amount of retirement related benefit expense recorded by us in future periods.The discount rate assumptions used to determine the post-retirement obligations of the benefit plans is based on a spot-rate yield curve that matchesprojected future benefit payments with the appropriate interest rate applicable to the timing of the projected future benefit payments. The assumed discountrates reflect market rates for high-quality corporate bonds currently available. Our discount rates were determined by considering the average of pension yieldcurves constructed of a large population of high quality corporate bonds. The resulting discount rates reflect the matching of plan liability cash flows to theyield curves.The expected long-term rate of return on plan assets reflects management’s expectations of long-term average rates of return on funds invested based onour investment profile to provide for benefits included in the projected benefit obligations. The expected return is based on the outlook for inflation, fixedincome returns and equity returns, while also considering historical returns over the last 10 years, and asset allocation and investment strategy.At the end of each calendar year an actuarial evaluation is performed to determine the funded status of our pension and post-retirement obligations andany actuarial gain or loss is recognized in other comprehensive income (loss) and then amortized into the income statement in future periods.Pension expense was $8.9 million, $6.9 million and $8.2 million for the years ended December 31, 2012, 2011 and 2010, respectively. The $2.0million increase in pension expenses in 2012 compared to 2011 was due to the inclusion of the Mead C&OP plans and the settlement losses on theSupplemental Retirement Plan (the "SRP") as part of the Merger. Post-retirement (income) expense was $(0.8) million, $0.2 million and $0.0 million for theyears ended December 31, 2012, 2011 and 2010, respectively.40Table of ContentsThe weighted average assumptions used to determine net cost for years ended December 31, 2012, 2011 and 2010 were: Pension Benefits Post-retirement U.S. International 2012 2011 2010 2012 2011 2010 2012 2011 2010Discount rate5.0% 5.5% 5.9% 4.7% 5.4% 5.8% 4.5% 5.0% 5.9%Expected long-term rate ofreturn8.2% 8.2% 8.2% 6.2% 6.4% 6.8% — — —Rate of compensation increaseN/A N/A N/A 3.6% 4.4% 4.5% — — —In 2013, we expect pension expenses of approximately $7.2 million and post-retirement income of approximately $0.2 million. The estimated $1.7million decrease in pension expense for 2013 compared to 2012 is primarily due to higher than expected returns on the plans assets because of higher level ofassets at the end of 2012 versus 2011, primarily due to actual market returns and the lack of service costs in our U.K. plan which was frozen to futureaccruals in 2012. Partially offsetting is a full year of expense for the acquired Mead C&OP plans as opposed to only 8 months of expense in 2012.A 25-basis point change (0.25%) in our discount rate assumption would lead to an increase or decrease in our pension expense of approximately $1.0million for 2013. 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 ofapproximately $1.1 million for 2013.Pension and post-retirement liabilities of $119.8 million as of December 31, 2012, increased from $106.1 million at December 31, 2011, due to lowerdiscount rates compared to prior year assumptions, partially offset by the actual over performance of the assets of the pension plans compared to the expectedlong-term rate of return of the assets of the pension plans.Weighted average assumptions used to determine benefit obligations for years ended December 31, 2012, 2011, and 2010 were: Pension Benefits Post-retirement U.S. International 2012 2011 2010 2012 2011 2010 2012 2011 2010Discount rate4.2% 5.0% 5.5% 4.3% 4.7% 5.4% 4.0% 4.5% 5.0%Rate of compensation increaseN/A N/A N/A 4.0% 3.6% 4.4% — — —Customer Program CostsCustomer programs and incentives are a common practice in our industry. We incur customer program costs to obtain favorable product placement, topromote sell-through of products and to maintain competitive pricing. Customer program costs and incentives, including rebates, promotional funds andvolume allowances, are accounted for as a reduction to gross sales. These costs are recorded at the time of sale based on management’s best estimates.Estimates are based on individual customer contracts and projected sales to the customer in comparison to any thresholds indicated by contract. In the absenceof a signed contract, estimates are based on historical or projected experience for each program type or customer. Management periodically reviews accruals forthese rebates and allowances, and adjusts accruals when circumstances indicate (typically as a result of a change in sales volume expectations or customercontracts).Income TaxesDeferred tax liabilities or assets are established for temporary differences between financial and tax reporting bases and are subsequently adjusted toreflect changes in tax rates expected to be in effect when the temporary differences reverse. A valuation allowance is recorded to reduce deferred tax assets to anamount that is more likely than not to be realized. Facts and circumstances may change that cause us to revise the conclusions on our ability to realize certainnet operating losses and other deferred tax attributes.The amount of income taxes that we pay is subject to ongoing audits by federal, state and foreign tax authorities. Our estimate of the potential outcome ofany uncertain tax position is subject to management’s assessment of relevant risks, facts and circumstances existing at that time. We believe that we haveadequately provided for reasonably foreseeable outcomes related to41Table of Contentsthese matters. However, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments arerevised or resolved.Deferred income taxes are not provided on certain undistributed earnings of foreign subsidiaries that are expected to be permanently reinvested in thosecompanies, aggregating approximately $586 million and $517 million as of December 31, 2012 and 2011, respectively. If these amounts were distributed tothe U.S., in the form of a dividend or otherwise, we would be subject to additional U.S. income taxes. Determination of the amount of unrecognized deferredincome tax liabilities on these earnings is not practicable.Stock–Based CompensationStock-based compensation cost is estimated at the grant date based on the fair value of the award, and the cost is recognized as expense ratably over thevesting period. Determining the appropriate fair value model to use requires judgment. Determining the assumptions that enter into the model is highlysubjective 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. The grant date fair value of each award is estimated using the Black-Scholes option-pricingmodel.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 to determinevolatility assumptions for stock-based compensation prior to 2012. Beginning with 2012 volatility is calculated using a combination of peer companies (50%)and ACCO Brands' historic volatility (50%). The weighted average expected option term reflects the application of the simplified method, which defines the lifeas the average of the contractual term of the options and the weighted average vesting period for all option tranches. The risk-free interest rate for the expectedterm of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Forfeitures are estimated at the time of grant in order to calculate theamount of share-based payment awards ultimately expected 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, the indicatedchange 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 LowerThe pre-vesting forfeitures assumption is ultimately adjusted to the actual forfeiture rate. Therefore, changes in the forfeitures assumption would notimpact the total amount of expense ultimately recognized over the vesting period. Different forfeitures assumptions would only impact the timing of expenserecognition over the vesting period. Estimated forfeitures will be reassessed in subsequent periods and may change based on new facts and circumstances.Management is not able to estimate the probability of actual results differing from expected results, but believes our assumptions are appropriate, basedupon our historical and expected future experience.We recognized stock-based compensation expense of $9.2 million, $6.3 million and $4.2 million for the years ended December 31, 2012, 2011 and2010, respectively.Recent Accounting PronouncementsIn September 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (ASU) No. 2011-08, Intangibles -Goodwill and Other (Topic 350): Testing Goodwill for Impairment. ASU No. 2011-08 was issued to simplify the testing of goodwill for impairment byallowing an optional qualitative factors test to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amountas a basis for determining whether it is necessary to perform the two-step goodwill impairment test already included in ASC Topic 350. ASU No. 2011-08 iseffective for annual and interim goodwill tests performed for fiscal years after December 15, 2011. We adopted the standard in 2012 and it did not have asignificant impact on its consolidated financial statements or results of operations.42Table of ContentsIn July 2012, the FASB issued ASU No. 2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets forImpairment. The revised standard is intended to reduce the cost and complexity of testing indefinite-lived intangible assets other than goodwill for impairment.It allows companies to perform a qualitative assessment to determine whether further impairment testing of indefinite-lived intangible assets is necessary,similar in approach to the goodwill impairment test. It is effective for annual and interim impairment tests performed for fiscal years beginning after September15, 2012. We will adopt the standard, and it is expected to have no effect on the consolidated financial statements or results of operations.In October 2012, the FASB issued ASU No. 2012-04, Technical Corrections and Improvements. The amendments in this ASU affect a wide range oftopics, but are generally considered nonsubstantive in nature. It is effective for fiscal periods beginning after December 15, 2012. We will adopt the standard,and it is expected to have no effect on the consolidated financial statements or results of operations.In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. Therevised standard is intended to improve the reporting of reclassifications out of accumulated other comprehensive income. It is effective for fiscal periodsbeginning after December 15, 2012. We will adopt the standard and its required disclosure.43Table of ContentsITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKOur industry is concentrated in a small number of major customers, principally office products superstores, large retailers, wholesalers and contractstationers. Customer consolidation and share growth of private-label products continue to increase pricing pressures, which may adversely affect margins forus and our competitors. We are addressing these challenges through design innovations, value-added features and services, as well as continued cost and assetreduction.We are exposed to various market risks, including changes in foreign currency exchange rates and interest rate changes. We enter into financialinstruments to manage and reduce the impact of these risks, not for trading or speculative purposes. The counterparties to these financial instruments aremajor financial institutions.Foreign Exchange Risk ManagementWe enter into forward foreign currency and option contracts principally to hedge currency fluctuations in transactions (primarily anticipated inventorypurchases and intercompany loans) denominated in foreign currencies, thereby limiting the risk that would otherwise result from changes in exchange rates.The majority of our exposure to local currency movements is in Europe, Australia, Canada, Brazil, Mexico and Japan. All of the existing foreign exchangecontracts as of December 31, 2012 have maturity dates in 2013. Increases and decreases in the fair market values of the forward agreements are expected to beoffset by gains/losses in recognized net underlying foreign currency transactions or loans. Notional amounts of outstanding foreign currency forward exchangecontracts were $175.4 million and $147.5 million at December 31, 2012 and 2011, respectively. The net fair value of these foreign currency contracts was$0.4 million and $2.4 million at December 31, 2012 and 2011, respectively. At December 31, 2012, a 10% unfavorable exchange rate movement in ourportfolio of foreign currency forward contracts would have reduced our unrealized gains by $13.9 million. Consistent with the use of these contracts toneutralize the effect of exchange rate fluctuations, such unrealized losses or gains would be offset by corresponding gains or losses, respectively, in theremeasurement of the underlying transactions being hedged. When taken together, we believe these forward contracts and the offsetting underlyingcommitments do not create material market risk.For more information related to outstanding foreign currency forward exchange contracts see Note 13, Fair Value of Financial Instruments and Note14, Derivative Financial Instruments, to the consolidated financial statements contained in Item 8 of this report.Interest Rate Risk ManagementAs discussed in Note 4, Long-term Debt and Short-term Borrowings, to the consolidated financial statements contained in Item 8 of this report, ourprevious debt has been refinanced in conjunction with the Merger with a combination of unsecured notes and senior secured term loans. The unsecured noteshave fixed interest rates and, accordingly, are not exposed to market risk resulting from changes in interest rates. However, the fair market value of our long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair market value of fixed interest rate debt will increase as interest rates fall anddecrease as interest rates rise. In addition, fair market values will also reflect the credit markets' view of credit risk spreads and our risk profile. These interestrate changes may affect the fair market value of the fixed interest rate debt and any repurchases of these notes, but do not impact our earnings or cash flows.Interest rates under the senior secured term loans are based on the London Interbank Offered Rate (LIBOR). The range of borrowing costs under thepricing grid is LIBOR plus 3.00% for $242.6 million of the debt and LIBOR plus 3.25% with a LIBOR rate floor of 1.00% for $326.8 million of the debt. Weare required to pay a quarterly commitment fee on the unused portion of the senior secured revolving credit facilities ranging from 0.375% to 0.5%, dependenton our consolidated leverage ratio. There were no borrowings outstanding under our senior secured revolving credit facilities as of December 31, 2012.The following table summarizes information about our major debt components as of December 31, 2012, including the principal cash payments andinterest rates.44Table of ContentsDebt Obligations Stated Maturity Date (in millions of dollars)2013(1) 2014(1) 2015(1) 2016 2017 Thereafter Total Fair ValueLong term debt: Fixed rate Unsecured Notes$— $— $— $— $— $500.0 $500.0 $523.8Average fixed interest rate6.75% 6.75% 6.75% 6.75% 6.75% 6.75% Variable rate Senior Secured Term Loans(U.S. dollars)$— $— $49.9 $99.8 $71.2 $326.7 $547.6 $549.2Variable rate Senior Secured Term Loan(Canadian dollars)$— $— $1.0 $12.1 $8.7 $— $21.8 $21.8Average variable interest rate(2)3.89% 3.89% 3.94% 4.09% 4.25% 4.25% (1)The required 2013, 2014 and some 2015 principal cash payments on the U.S. Dollar and Canadian Dollar Senior Secured Term Loans were made in2012.(2)Rates presented are as of December 31, 2012.45Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAINDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageReport of Independent Registered Public Accounting Firm47Management’s Report on Internal Control Over Financial Reporting48Consolidated Balance Sheets49Consolidated Statements of Operations50Consolidated Statements of Comprehensive Income (Loss)51Consolidated Statements of Cash Flows52Consolidated Statements of Stockholders’ Equity (Deficit)53Notes to Consolidated Financial Statements5446Table of ContentsReport of Independent Registered Public Accounting FirmThe Board of Directors and Stockholders of ACCO Brands Corporation:We have audited the accompanying consolidated balance sheets of ACCO Brands Corporation and subsidiaries as of December 31, 2012 and 2011, and the relatedconsolidated statements of operations, comprehensive income (loss), cash flows, and stockholders' equity (deficit), for each of the years in the three-year period endedDecember 31, 2012. In connection with our audits of the consolidated financial statements, we also audited the related consolidated financial statement schedule, Schedule II -Valuation and Qualifying Accounts and Reserves. We also have audited ACCO Brands Corporation's internal control over financial reporting as of December 31, 2012, based oncriteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). ACCOBrands Corporation's management is responsible for these consolidated financial statements and financial statement schedule, for maintaining effective internal control over financialreporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management report on internal control over financialreporting. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule and an opinion on the Company's internal controlover financial reporting based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan andperform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financialreporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statementpresentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a materialweakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such otherprocedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparationof financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policiesand procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accountingprinciples, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on thefinancial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness tofuture periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures maydeteriorate.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ACCO Brands Corporation andsubsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2012,in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidatedfinancial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Also in our opinion, ACCO Brands Corporation maintained, in allmaterial respects, effective internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issuedby the Committee of Sponsoring Organizations of the Treadway Commission.ACCO Brands Corporation acquired the Mead Consumer and Office Products Business (“Mead C&OP Business”) during 2012, and management excluded from itsassessment of the effectiveness of ACCO Brands Corporation's internal control over financial reporting as of December 31, 2012, the Mead C&OP Business's internal controlover financial reporting associated with total assets of $514.4 million and total revenues of $551.5 million included in the consolidated financial statements of ACCO BrandsCorporation and subsidiaries as of and for the year ended December 31, 2012. Our audit of internal control over financial reporting of ACCO Brands Corporation also excludedan evaluation of the internal control over financial reporting of the Mead C&OP Business./s/ KPMG LLPChicago, IllinoisFebruary 28, 201347Table of ContentsMANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTINGManagement of ACCO Brands Corporation and its subsidiaries is responsible for establishing and maintaining adequate internal controls over financialreporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting isdesigned and effected by the Company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of theCompany’s financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accountingprinciples.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith 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 over financialreporting as of December 31, 2012. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of theTreadway Commission (COSO) in Internal Control-Integrated Framework.Based on our assessment, management concluded that the Company maintained effective internal control over financial reporting as of December 31,2012.The scope of managements' assessment of the effectiveness of internal control over financial reporting includes all of the Company's business unitsexcept for the Mead Consumer and Office Products Business (“Mead C&OP”), which was acquired by the Company on May 1, 2012. Consolidated net salesfor the year-ended December 31, 2012 were $551.5 million and consolidated assets as of December 31, 2012 were $514.4 million.The effectiveness of the Company’s internal control over financial reporting as of December 31, 2012 has been audited by KPMG LLP, an independentregistered public accounting firm, as stated in their report that appears herein. /s/ ROBERT J. KELLER /s/ NEAL V. FENWICKRobert J. Keller Neal V. FenwickChairman of the Board and Executive Vice President andChief Executive Officer Chief Financial Officer(principal executive officer) (principal financial officer)February 28, 2013 February 28, 201348Table of ContentsACCO Brands Corporation and SubsidiariesConsolidated Balance Sheets December 31, 2012 December 31, 2011(in millions of dollars, except share data) Assets Current assets: Cash and cash equivalents$50.0 $121.2Accounts receivable less allowances for discounts, doubtful accounts and returns of $19.3 and $13.9,respectively498.7 269.5Inventories265.5 197.7Deferred income taxes31.1 7.6Other current assets29.0 26.9Total current assets874.3 622.9Total property, plant and equipment591.4 463.3Less accumulated depreciation(317.8) (316.1)Property, plant and equipment, net273.6 147.2Deferred income taxes36.4 16.7Goodwill589.4 135.0Identifiable intangibles, net of accumulated amortization of $123.3 and $102.3, respectively646.6 130.4Other assets87.4 64.5Total assets$2,507.7 $1,116.7Liabilities and Stockholders' Equity (Deficit) Current liabilities: Notes payable to banks$1.2 $—Current portion of long-term debt0.1 0.2Accounts payable152.4 127.1Accrued compensation38.0 24.2Accrued customer program liabilities119.0 66.8Accrued interest6.3 20.2Other current liabilities112.4 67.6Total current liabilities429.4 306.1Long-term debt1,070.8 668.8Deferred income taxes165.0 85.6Pension and post-retirement benefit obligations119.8 106.1Other non-current liabilities83.5 12.0Total liabilities1,868.5 1,178.6Stockholders’ deficit: Stockholders' equity (deficit): Preferred stock, $0.01 par value, 25,000,000 shares authorized; none issued and outstanding— —Common stock, $0.01 par value, 200,000,000 shares authorized; 113,403,824 and 55,659,753 shares issuedand 113,143,344 and 55,475,735 outstanding, respectively1.1 0.6Treasury stock, 260,480 and 184,018 shares, respectively(2.5) (1.7)Paid-in capital2,018.5 1,407.4Accumulated other comprehensive loss(156.1) (131.0)Accumulated deficit(1,221.8) (1,337.2)Total stockholders' equity (deficit)639.2 (61.9)Total liabilities and stockholders' equity (deficit)$2,507.7 $1,116.7See notes to consolidated financial statements.49Table of ContentsACCO Brands Corporation and SubsidiariesConsolidated Statements of Operations Year Ended December 31,(in millions of dollars, except per share data)2012 2011 2010Net sales$1,758.5 $1,318.4 $1,284.6Cost of products sold1,225.1 919.2 902.0Gross profit533.4 399.2 382.6Operating costs and expenses: Advertising, selling, general and administrative expenses349.9 278.4 266.7Amortization of intangibles19.9 6.3 6.7Restructuring charges (income)24.3 (0.7) (0.5)Total operating costs and expenses394.1 284.0 272.9Operating income139.3 115.2 109.7Non-operating expense (income): Interest expense, net89.3 77.2 78.3Equity in earnings of joint ventures(6.9) (8.5) (8.3)Other expense, net61.3 3.6 1.2Income (loss) from continuing operations before income tax(4.4) 42.9 38.5Income tax (benefit) expense(121.4) 24.3 30.7Income from continuing operations117.0 18.6 7.8Income (loss) from discontinued operations, net of income taxes(1.6) 38.1 4.6Net income$115.4 $56.7 $12.4Per share: Basic income per share: Income from continuing operations$1.24 $0.34 $0.14Income (loss) from discontinued operations$(0.02) $0.69 $0.08Basic income per share$1.23 $1.03 $0.23Diluted income per share: Income from continuing operations$1.22 $0.32 $0.14Income (loss) from discontinued operations$(0.02) $0.66 $0.08Diluted income per share$1.20 $0.98 $0.22Weighted average number of shares outstanding: Basic94.1 55.2 54.8Diluted96.1 57.6 57.2See notes to consolidated financial statements.50Table of ContentsACCO Brands Corporation and SubsidiariesConsolidated Statements of Comprehensive Income (Loss) Year Ended December 31,(in millions of dollars)2012 2011 2010Net income$115.4 $56.7 $12.4Other comprehensive income (loss), before tax: Unrealized losses on derivative financial instruments: Losses arising during the period(0.2) (0.3) (3.1)Reclassification adjustment for (income) losses included in net income(1.9) 4.9 1.8Foreign currency translation: Foreign currency translation adjustments(10.9) (8.9) 11.0Less: reclassification adjustment for sale of GBC Fordigraph Pty Ltd included in netincome— (6.1) —Pension and other post-retirement plans: Actuarial (loss) gain arising during the period(21.1) (46.3) 4.4Amortization of actuarial loss and prior service cost included in net income7.2 7.8 7.0Other(4.5) 0.9 3.0Other comprehensive income (loss), before tax(31.4) (48.0) 24.1Income tax expense related to items of other comprehensive income (loss)6.3 3.1 (3.2)Comprehensive income$90.3 $11.8 $33.3See notes to consolidated financial statements.51Table of ContentsACCO Brands Corporation and SubsidiariesConsolidated Statements of Cash Flows Year Ended December 31,(in millions of dollars)2012 2011 2010Operating activities Net income$115.4 $56.7 $12.4Amortization of inventory step-up13.3 — —Loss (gain) on disposal of assets2.0 (40.4) (1.5)Deferred income tax provision(9.9) 3.9 12.3Release of tax valuation allowance(145.1) — —Depreciation34.5 26.5 29.6Other non-cash charges2.3 0.1 0.7Amortization of debt issuance costs and bond discount9.9 8.2 6.3Amortization of intangibles19.9 6.4 6.9Stock-based compensation9.2 6.3 4.2Loss on debt extinguishment15.5 2.9 —Changes in balance sheet items: Accounts receivable(153.8) 0.6 (18.5)Inventories61.8 5.4 (9.8)Other assets7.4 0.2 (5.1)Accounts payable(25.0) 16.8 14.8Accrued expenses and other liabilities30.1 (27.8) (2.2)Accrued income taxes2.0 (1.1) 7.7Equity in earnings of joint ventures, net of dividends received3.0 (2.9) (2.9)Net cash (used) provided by operating activities(7.5) 61.8 54.9Investing activities Additions to property, plant and equipment(30.3) (13.5) (12.6)Assets acquired— (1.4) (1.1)Proceeds (payments) from the sale of discontinued operations1.5 53.5 (3.7)Proceeds from the disposition of assets3.1 1.4 2.5Cost of acquisition, net of cash acquired(397.5) — —Net cash (used) provided by investing activities(423.2) 40.0 (14.9)Financing activities Proceeds from long-term debt1,270.0 0.1 1.5Repayments of long-term debt(872.0) (63.0) (0.2)Borrowings (repayments) of short-term debt, net1.2 — (0.5)Payments for debt issuance costs(38.5) — (0.8)Net payments for exercise of stock options(0.6) (0.2) (0.1)Net cash provided (used) by financing activities360.1 (63.1) (0.1)Effect of foreign exchange rate changes on cash(0.6) (0.7) (0.3)Net (decrease) increase in cash and cash equivalents(71.2) 38.0 39.6Cash and cash equivalents Beginning of period121.2 83.2 43.6End of period$50.0 $121.2 $83.2Cash paid during the year for: Interest$94.9 $71.9 $70.6Income taxes$28.8 $27.7 $13.9 Year Ended December 31,(in millions of dollars)2012 2011 2010Non-cash transactions Common stock issued in conjunction with the Mead C&OP acquisition$602.3 $— $—See notes to consolidated financial statements.52Table of ContentsACCO Brands Corporation and SubsidiariesConsolidated Statements of Stockholders’ Equity (Deficit) (in millions of dollars)CommonStock Paid-inCapital AccumulatedOtherComprehensiveIncome (Loss) TreasuryStock AccumulatedDeficit TotalBalance at December 31, 2009$0.5 $1,397.0 $(107.0) $(1.4) $(1,406.3) $(117.2)Net loss— — — — 12.4 12.4Loss on derivative financialinstruments, net of tax— — (0.5) — — (0.5)Translation impact— — 11.0 — — 11.0Pension and post-retirementadjustment, net of tax— — 10.4 — — 10.4Stock-based compensation activity0.1 4.2 — (0.1) — 4.2Other— (0.1) — — — (0.1)Balance at December 31, 20100.6 1,401.1 (86.1) (1.5) (1,393.9) (79.8)Net income— — — — 56.7 56.7Income on derivative financialinstruments, net of tax— — 3.7 — — 3.7Translation impact— — (15.0) — — (15.0)Pension and post-retirementadjustment, net of tax— — (33.6) — — (33.6)Stock-based compensation activity— 6.3 — (0.2) — 6.1Balance at December 31, 20110.6 1,407.4 (131.0) (1.7) (1,337.2) (61.9)Net income— — — — 115.4 115.4Stock issuance - Mead C&OPacquisition0.5 601.8 — — — 602.3Loss on derivative financialinstruments, net of tax— — (2.1) — — (2.1)Translation impact— — (10.9) — — (10.9)Pension and post-retirementadjustment, net of tax— — (12.1) — — (12.1)Stock-based compensation activity— 9.4 — (0.8) — 8.6Other— (0.1) — — — (0.1)Balance at December 31, 2012$1.1 $2,018.5 $(156.1) $(2.5) $(1,221.8) $639.2Shares of Capital Stock CommonStock TreasuryStock NetSharesShares at December 31, 200954,719,296 (147,105) 54,572,191Stock issuances - stock based compensation361,167 (10,575) 350,592Shares at December 31, 201055,080,463 (157,680) 54,922,783Stock issuances - stock based compensation579,290 (26,338) 552,952Shares at December 31, 201155,659,753 (184,018) 55,475,735Stock issuances - stock based compensation654,263 (76,462) 577,801Stock issuance - Mead C&OP acquisition57,089,808 — 57,089,808Shares at December 31, 2012113,403,824 (260,480) 113,143,344See notes to consolidated financial statements.53Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements1. Basis of PresentationThe management of ACCO Brands Corporation is responsible for the accuracy and internal consistency of the preparation of the consolidated financialstatements and notes contained in this annual report.The consolidated financial statements include the accounts of ACCO Brands Corporation and its domestic and international subsidiaries. Intercompanyaccounts and transactions have been eliminated in consolidation. Our investments in companies that are between 20% and 50% owned are accounted for usingthe equity method of accounting. ACCO Brands has equity investments in the following joint ventures: Pelikan-Artline Pty Ltd (“Pelikan-Artline”) - 50%ownership; and Neschen GBC Graphic Films, LCC (“Neschen”) - 50% ownership. Our share of earnings from equity investments is included on the lineentitled “Equity in earnings of joint ventures” in the consolidated statements of operations. Companies in which our investment exceeds 50% have beenconsolidated.On May 1, 2012, we completed the merger of the Mead Consumer and Office Products Business (“Mead C&OP”) with a wholly-owned subsidiary ofthe Company (the "Merger"). Accordingly, the results of Mead C&OP are included in our consolidated financial statements from the date of the Merger, May1, 2012. For further information on the Merger see Note 3, Acquisitions.As part of the inclusion of Mead C&OP's financial results with those of the Company, certain information technology costs associated with themanufacturing, procurement and distribution operations have been reclassified from advertising, selling, general and administrative expenses (SG&A) to costof products sold. This was done to enable the financial results of the two businesses to be consistent and to better reflect those costs associated with the cost ofproducts sold. All prior periods have been adjusted to make the results comparable. For the years ended December 31, 2011 and 2010 reclassified costs totaled$15.5 million and $14.6 million, respectively. These historical reclassifications were not material and have had no effect on net income.We sold our GBC Fordigraph Pty Ltd (“GBC Fordigraph”) business to The Neopost Group as of May 31, 2011. This business was part of the ACCOBrands International segment. GBC Fordigraph is reported as a discontinued operation on the condensed consolidated statement of operations for all periodspresented in this annual report. The cash flows from discontinued operations have not been separately classified on the accompanying consolidated statementsof cash flows. For further information on the Company’s discontinued operations see Note 18, Discontinued Operations.2. Significant Accounting PoliciesNature of BusinessACCO Brands is primarily involved in the manufacturing, marketing and distribution of office products; such as stapling, binding and laminatingequipment and related consumable supplies, shredders and whiteboards; school products; such as notebooks, folders, decorative calendars, and stationeryproducts; calendar products; and accessories for laptop and desktop computers, smartphones and tablets - selling primarily to large resellers. Oursubsidiaries operate principally in the United States, Northern Europe, Canada, Brazil, Australia and Mexico.Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financialstatements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Cash and Cash EquivalentsHighly liquid investments with an original maturity of three months or less are included in cash and cash equivalents.Allowances for Doubtful Accounts, Discounts and ReturnsTrade receivables are recorded at the stated amount, less allowances for discounts, doubtful accounts and returns. The allowance for doubtful accountsrepresents estimated uncollectible receivables associated with potential customer defaults on54Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)contractual obligations, usually due to customers’ potential insolvency. The allowances include amounts for certain customers where a risk of default has beenspecifically identified. In addition, the allowances includes a provision for customer defaults on a general formula basis when it is determined the risk of somedefault is probable and estimable, but cannot yet be associated with specific customers. The assessment of the likelihood of customer defaults is based onvarious 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 historical trends.In addition, the allowance includes a reserve for currently authorized customer returns that are considered to be abnormal in comparison to the historical basis.InventoriesInventories are priced at the lower of cost (principally first-in, first-out with minor amounts at average) or market. A reserve is established to adjust thecost of inventory to its net realizable value. Inventory reserves are recorded for obsolete or slow-moving inventory based on assumptions about future demandand marketability of products, the impact of new product introductions and specific identification of items, such as product discontinuance orengineering/material changes. These estimates could vary significantly, either favorably or unfavorably, from actual requirements if future economicconditions, customer inventory levels or competitive conditions differ from expectations.Property, Plant and EquipmentProperty, 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 an asset arecapitalized; maintenance and repair costs are expensed. Purchased computer software is capitalized and amortized over the software’s useful life.The following table shows estimated useful lives of property, plant and equipment: Buildings 40 to 50 yearsLeasehold improvements Lesser of lease term or the life of the assetMachinery, equipment and furniture 3 to 10 yearsLong-Lived AssetsWe test long-lived assets for impairment whenever events or changes in circumstances indicate that the assets’ carrying amount is not recoverable fromits undiscounted cash flows. When such events occur, we compare the sum of the undiscounted cash flows expected to result from the use and eventualdisposition of the asset or asset group to the carrying amount of a long-lived asset or asset group. The cash flows are based on our best estimate at the time offuture cash flow, derived from the most recent business projections. If this comparison indicates that there is impairment, the amount of the impairment istypically calculated using discounted expected future cash flows. The discount rate applied to these cash flows is based on our weighted average cost ofcapital, computed by selecting market rates at the valuation dates for debt and equity that are reflective of the risks associated with an investment in ourindustry as estimated by using comparable publicly traded companies.Intangible AssetsIntangible assets are comprised primarily of indefinite-lived intangible assets acquired and purchased intangible assets arising from the application ofpurchase accounting. Indefinite-lived intangible assets are not amortized, but are evaluated annually to determine whether the indefinite useful life isappropriate. Indefinite-lived intangibles are tested for impairment on an annual basis and written down when impaired. An interim impairment test isperformed if an event occurs or conditions change that would more likely than not reduce the fair value below the carrying value.In addition, purchased intangible assets other than goodwill are amortized over their useful lives unless their lives are determined to be indefinite. Certainof our trade names have been assigned an indefinite life as we currently anticipate that these trade names will contribute cash flows to ACCO Brandsindefinitely.55Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)We review indefinite-lived intangibles for impairment annually, normally in the second quarter, and whenever market or business events indicate theremay be a potential adverse impact on a particular intangible. We consider the implications of both external factors (e.g., market growth, pricing, competition,and technology) and internal factors (e.g., product costs, margins, support expenses, and capital investment) and their potential impact on cash flows for eachbusiness in both the near and long term, as well as their impact on any identifiable intangible asset associated with the business. Based on recent businessresults, 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 and futureexpectations, management considers whether the potential for impairment exists. Finite lived intangibles are amortized over 10, 15, 23 or 30 years.As part of our review in the second quarter of 2012, $21.4 million of the value previously assigned to one of our legacy indefinite-lived trade names waschanged to an amortizable intangible asset. The legacy indefinite-lived trade name was not impaired. The change was made in respect of decisions regardingour future use of the trade name. We commenced amortizing the trade name in June of 2012 on a prospective basis over a life of 30 years.GoodwillGoodwill has been recorded on our balance sheet and represents the excess of the cost of the acquisitions when compared to the fair value of the net assetsacquired. We test goodwill for impairment at least annually, normally in the second quarter, and on an interim basis if an event or circumstance indicates thatit is more likely than not that an impairment has been incurred. If the carrying amount of the goodwill exceeds its fair value, an impairment loss is recognized.During 2012, we adopted ASU No. 2011-08, Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment. ASU No. 2011-08 permitsentities to first assess qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount as abasis for determining whether it is necessary to perform the two-step goodwill impairment test included in U.S. GAAP. Entities are not required to calculate thefair value of a reporting unit unless they determine that it is more likely than not that the fair value is less than the carrying amount. We concluded it was notnecessary to apply the traditional two-step fair value quantitative impairment test in ASC 350 to any of our reporting units in 2012. When applying a fair-value-based test, estimates are made of the expected future cash flows to be derived from each reporting unit. The resulting fair value determination issignificantly impacted by estimates of future prices for our products, capital needs, economic trends and other factors.Given the current economic environment and the uncertainties regarding the impact on our business, there can be no assurance that our estimates andassumptions made for purposes of our qualitative impairment testing during 2012 will prove to be accurate predictions of the future. If our assumptionsregarding forecasted revenue or margin growth rates of certain reporting units are not achieved, we may be required to record impairment charges in futureperiods, whether in connection with our next annual impairment testing in the second quarter of fiscal year 2013 or prior to that, if any such change constitutesa triggering event outside of the quarter from when the annual impairment test is performed. It is not possible at this time to determine if any such futureimpairment charge would result or, if it does, whether such charge would be material.Employee Benefit PlansWe provide a range of benefits to our employees and retired employees, including pension, post-retirement, post-employment and health care benefits. Werecord annual amounts relating to these plans based on calculations, which include various actuarial assumptions, including discount rates, assumed rates ofreturn on plan assets, compensation increases, turnover rates and health care cost trend rates. We review our actuarial assumptions on an annual basis andmake modifications to the assumptions based on current rates and trends when it is deemed appropriate to do so. The effect of the modifications are generallyrecorded and amortized over future periods.Income TaxesDeferred tax liabilities or assets are established for temporary differences between financial and tax reporting bases and are subsequently adjusted toreflect changes in tax rates expected to be in effect when the temporary differences reverse. A valuation allowance is recorded to reduce deferred tax assets to anamount that is more likely than not to be realized. Facts and circumstances may change and cause us to revise the conclusions on our ability to realize certainnet operating losses and other deferred tax attributes.56Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)The amount of income taxes that we pay is subject to ongoing audits by federal, state and foreign tax authorities. Our estimate of the potential outcome ofany uncertain tax position is subject to management’s assessment of relevant risks, facts and circumstances existing at that time. We believe that we haveadequately provided for reasonably foreseeable outcomes related to these matters. However, our future results may include favorable or unfavorableadjustments to our estimated tax liabilities in the period the assessments are revised or resolved.Revenue RecognitionWe recognize revenue from product sales when earned, net of applicable provisions for discounts, returns and allowances. We consider revenue to berealized or realizable and earned when all of the following criteria are met: title and risk of loss have passed to the customer, persuasive evidence of anarrangement exists, delivery has occurred, the price is fixed or determinable and collectability is reasonably assured. We also provide for our estimate ofpotential bad debt at the time of revenue recognition.Cost of Products SoldCost of products sold includes all manufacturing, product sourcing and distribution costs, including depreciation related to assets used in themanufacturing, procurement and distribution process, allocation of certain information technology costs supporting those processes, inbound and outboundfreight, shipping and handling costs, purchasing costs associated with materials and packaging used in the production processes.Advertising, Selling, General and Administrative ExpensesAdvertising, selling, general and administrative expenses include advertising, marketing, selling (including commissions), research and development,customer service, depreciation related to assets outside the manufacturing and distribution processes and all other general and administrative expenses outsidethe manufacturing and distribution functions (e.g., finance, human resources, information technology, etc.).Customer Program CostsCustomer 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 allowance programs. Wegenerally recognizes customer program costs as a deduction to gross sales at the time that the associated revenue is recognized. Certain customer incentives thatdo not directly relate to future revenues are expensed when initiated.In addition, accrued customer program liabilities 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 HandlingWe reflect all amounts billed to customers for shipping and handling in net sales and the costs incurred from shipping and handling product (includingcosts 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, move and prepare products forshipment) in cost of products sold.Warranty ReservesWe offer our customers various warranty terms based on the type of product that is sold. Estimated future obligations related to products sold underthese warranty terms are provided by charges to operations in the period in which the related revenue is recognized.Advertising CostsAdvertising costs amounted to $125.7 million, $98.1 million and $92.9 million for the years ended December 31, 2012, 2011 and 2010, respectively.These costs include, but are not limited to, cooperative advertising and promotional allowances as described in “Customer Program Costs” above, and areprincipally expensed as incurred.57Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)Research and DevelopmentResearch and development expenses, which amounted to $20.8 million, $20.5 million and $24.0 million for the years ended December 31, 2012, 2011and 2010, respectively, are classified as general and administrative expenses and are charged to expense as incurred.Stock-Based CompensationOur primary types of share-based compensation consist of stock options, stock-settled appreciation rights, restricted stock unit awards, andperformance stock unit awards. Stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized asexpense over the requisite service period. Where awards are made with non-substantive vesting periods (for example, where a portion of the award vests uponretirement eligibility), we estimate and recognize expense based on the period from the grant date to the date on which the employee is retirement eligible.Foreign Currency TranslationForeign 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 ofaccumulated other comprehensive income (loss) in stockholders’ equity. Some transactions are made in currencies different from an entity’s functionalcurrency. Gains and losses on these foreign currency transactions are included in income as they occur.Derivative Financial InstrumentsWe recognize all derivatives as either assets or liabilities on the balance sheet and measures those instruments at fair value. If the derivative is designatedas a fair 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 are recordedin other comprehensive income (loss) and are recognized in the income statement when the hedged item affects earnings. Ineffective portions of changes in thefair value of cash flow hedges are recognized in earnings.Certain forecasted transactions, assets and liabilities are exposed to foreign currency risk. We continually monitor our foreign currency exposures inorder to maximize the overall effectiveness of our foreign currency hedge positions. Principal currencies hedged include the U.S. dollar, Euro, Australiandollar, Canadian dollar and Pound sterling.Recent Accounting PronouncementsIn September 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (ASU) No. 2011-08, Intangibles -Goodwill and Other (Topic 350): Testing Goodwill for Impairment. ASU No. 2011-08 was issued to simplify the testing of goodwill for impairment byallowing an optional qualitative factors test to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amountas a basis for determining whether it is necessary to perform the two-step goodwill impairment test already included in ASC Topic 350. ASU No. 2011-08 iseffective for annual and interim goodwill tests performed for fiscal years after December 15, 2011. We adopted the standard in 2012 and it did not have asignificant impact on our consolidated financial statements or results of operations.In July 2012, the FASB issued ASU No. 2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets forImpairment. The revised standard is intended to reduce the cost and complexity of testing indefinite-lived intangible assets other than goodwill for impairment.It allows companies to perform a qualitative assessment to determine whether further impairment testing of indefinite-lived intangible assets is necessary,similar in approach to the goodwill impairment test. It is effective for annual and interim impairment tests performed for fiscal years beginning after September15, 2012. We will adopt the standard, and it is expected to have no effect on the consolidated financial statements or results of operations.In October 2012, the FASB issued ASU No. 2012-04, Technical Corrections and Improvements. The amendments in this ASU affect a wide range oftopics, but are generally considered nonsubstantive in nature. It is effective for fiscal periods beginning58Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)after December 15, 2012. We will adopt the standard, and it is expected to have no effect on the consolidated financial statements or results of operations.In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. Therevised standard is intended to improve the reporting of reclassifications out of accumulated other comprehensive income. It is effective for fiscal periodsbeginning after December 15, 2012. We will adopt the standard and its required disclosure.3. AcquisitionsOn May 1, 2012, the Company completed the Merger of Mead C&OP with a wholly-owned subsidiary of the Company. Mead C&OP is a leadingmanufacturer and marketer of school supplies, office products, and planning and organizing tools - including the Mead®, Five Star®, Trapper Keeper®, AT-A-GLANCE®, Cambridge®, Day Runner®, Hilroy, Tilibra and Grafons brands in the U.S., Canada and Brazil.In the Merger, MeadWestvaco Corporation (“MWV”) shareholders received 57.1 million shares of the Company's common stock, or 50.5% of thecombined company, valued at $602.3 million on the date of the Merger. After the transaction was completed we had 113.1 million common sharesoutstanding.Under the terms of the Merger agreement, MWV established a new subsidiary (“Monaco SpinCo Inc.”) to which it conveyed Mead C&OP in return fora $460.0 million payment. The shares of Monaco SpinCo Inc. were then distributed to MWV's shareholders as a dividend. Immediately after the spin-off anddistribution, a newly formed subsidiary of the Company merged with and into Monaco SpinCo Inc. and MWV shareholders effectively received in the stockdividend and subsequent conversion approximately one share of ACCO Brands common stock for every three shares of MWV they held. Fractional shareswere paid in cash. The subsidiary company subsequently merged with Mead Products LLC (“Mead Products”), the surviving corporate entity, which is awholly-owned subsidiary of ACCO Brands Corporation.For accounting purposes, the Company is the acquiring enterprise. Accounting Standards Codification (“ASC”) Topic 805 “Business Combinations”requires the use of the purchase method of accounting for business combinations. In applying the purchase method, it is necessary to identify both theaccounting acquiree and the accounting acquiror. In a business combination effected through an exchange of equity interests, such as the Merger, the entity thatissues the shares (ACCO in this case) is generally the acquiring entity. In identifying the acquiring entity in a combination effected through an exchange ofequity interests, however, all pertinent facts and circumstances must be considered, including the following:•The relative voting interests in the combined entity after the combination. In this case stockholders of MWV, the sole stockholder of MonacoSpinCo Inc., received 50.5% of the equity ownership and associated voting rights in ACCO.•The composition of the governing body of the combined entity . In this case the composition of the Board of Directors of ACCO is composed of themembers of the Board of Directors of ACCO and two members, who were selected by MWV and approved by the ACCO Board of Directors.•The composition of the senior management of the combined entity. In this case, the senior management of ACCO is composed of the members ofsenior management of ACCO immediately prior to consummation of the Merger, along with an executive of MEAD C&OP.ACCO’s management determined that ACCO is the accounting acquiror in this combination based on the facts and circumstances outlined above.Accordingly, the results of Mead C&OP are included in the Company's consolidated financial statements from the date of the Merger, May 1, 2012.The purchase price, net of working capital adjustments and cash acquired, was $999.8 million. The consideration given included 57.1 million sharesof ACCO Brands common stock, which were issued to MWV shareholders with a fair value of $602.3 million and a $460.0 million dividend paid to MWV.The calculation of consideration given for Mead C&OP was finalized during the fourth quarter of 2012 and is described in the following table.59Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)(in millions, except per share price)At May 1, 2012Calculated consideration for Mead C&OP: Outstanding shares of ACCO Brands common stock(1)56.0Multiplier needed to calculate shares to be issued(2)1.0202020202Number of shares issued to MWV shareholders57.1Closing price per share of ACCO Brands common stock(3)$10.55Value of common shares issued$602.3Plus: Dividend paid to MWV460.0Less: Working capital adjustment(4)(30.5)Consideration for Mead C&OP$1,031.8(1) Represents the number of shares of the Company's common stock as of May 1, 2012.(2) Represents MWV shareholders' negotiated ownership percentage in ACCO Brands of 50.5% divided by the 49.5% that was owned by ACCO Brandsshareholders upon completion of the Merger.(3) Represents the closing price per share of the Company's stock as of April 30, 2012.(4) Represents the difference between the target net working capital and the closing net working capital as of April 30, 2012.The following table presents the preliminary allocation of the purchase price to the fair values of the assets acquired and liabilities assumed at the date ofacquisition.(in millions of dollars)At May 1, 2012Calculation of Goodwill: Consideration given for Mead C&OP$1,031.8Cash acquired(32.0) Net purchase price$999.8Plus fair value of liabilities assumed: Accounts payable and accrued liabilities103.8Current and non-current deferred tax liabilities207.8Other non-current liabilities72.8 Fair value of liabilities assumed$384.4 Less fair value of assets acquired: Accounts receivable73.3Inventory143.5Property, plant and equipment136.6Identifiable intangibles543.2Other assets24.2 Fair value of assets acquired$920.8 Goodwill$463.4We are continuing our review of our fair value estimate of assets acquired and liabilities assumed during the measurement period, which will conclude assoon as we receive the information we are seeking about facts and circumstances that existed as of the acquisition date, or learn that more information is notavailable. This measurement period will not exceed one year from60Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)the acquisition date. The excess of the purchase price over the preliminary fair value of net assets acquired has been allocated to goodwill in the amount of$463.4 million.The final determination of the fair values and resulting goodwill may differ significantly from what is reflected above. Our fair value estimate of assetsacquired and liabilities assumed is pending review and completion of several elements. The primary areas that are not yet finalized relate to on-going legaldisputes, income and non-income related taxes and the fair value of contingent assets or liabilities. Accordingly, there could be material adjustments to ourconsolidated financial statements.In connection with our May 1, 2012 acquisition of Mead C&OP, we assumed all of the tax liabilities for the acquired foreign operations. In December of2012, the Federal Revenue Department of the Ministry of Finance of Brazil ("FRD") issued a tax assessment against our newly acquired indirect subsidiary,Tilibra Produtos de Papelaria Ltda. ("Tilibra"), which challenged the goodwill recorded in connection with the 2004 acquisition of Tilibra. This assessmentdenied the deductibility of that goodwill from Tilibra's taxable income for the year 2007. The assessment seeks a payment of approximately R$26.9 million($13.2 million based on current exchange rates) of tax, penalties and interest.In January of 2013, Tilibra filed a protest disputing the tax assessment at the first administrative level of appeal within the FRD. We believe that we havemeritorious defenses and intend to vigorously contest this matter, however, there can be no assurances that we will ultimately prevail. We are in the early stagesof the process to challenge the FRD's tax assessment, and the ultimate outcome will not be determined until the Brazilian tax appeal process is complete, whichis expected to take many years. In addition, Tilibra's 2008-2012 tax years remain open and subject to audit, and there can be no assurances that we will notreceive additional tax assessments regarding the goodwill deducted for the Tilibra acquisition for one or more of those years, which could increase theCompany's exposure to a total of approximately $44.5 million (based on current exchange rates), including interest and penalties which have accumulated todate. If the FRD's initial position is ultimately sustained, the amount assessed would adversely affect our reported cash flow in the year of settlement.Because there is no settled legal precedent on which to base a definitive opinion as to whether we will ultimately prevail, the Company considers theoutcome of this dispute to be uncertain. Since it is not more likely than not that we will prevail, in the fourth quarter of 2012, we recorded a reserve in theamount of $44.5 million in consideration of this matter, of which $43.3 million was recorded as an adjustment to the allocation of the purchase price for thefair value of non-current liabilities assumed as of the acquisition date and was recorded as an increase to goodwill. In addition, the Company will continue toaccrue interest related to this matter until such time as the outcome is known or until evidence is presented that we are more likely than not to prevail. During2012, the Company accrued $1.2 million of additional interest that has accumulated since the date of the acquisition as a charge to current income tax expense.Acquisition-related costs of $14.5 million that were incurred during the twelve months ended December 31, 2012, and $5.6 million that were expensedduring 2011, were classified as Selling, General and Administrative expenses.Had the acquisition occurred on January 1, 2011, unaudited pro forma consolidated results for the twelve month periods ending December 31, 2012 and2011 would have been as follows: Twelve Months Ended December 31,(in millions of dollar, except per share data)2012 2011Net sales$1,895.0 $2,064.0Income from continuing operations60.4 116.7Income from continuing operations per common share (diluted)$0.53 $1.03The pro forma amounts above are not necessarily indicative of the results that would have occurred if the acquisition had been completed on January 1,2011. The pro forma amounts are based on the historical results of operations, and are adjusted for depreciation and amortization of finite-lived intangiblesand property, plant and equipment, and other charges related to acquisition accounting. The pro forma results of operations for the twelve months endedDecember 31, 2011 have also been adjusted to include certain transaction and financing related costs in the first year of combined reporting. These 2011adjustments include: amortization of the purchase accounting step-up in inventory cost of $13.3 million, transaction costs related to the Merger of $20.1million and expenses of $88.0 million related to the Company's refinancing completed on May 1, 2012. Also included is $101.9 million for the release of theU.S. tax valuation allowance as if the Company began providing a tax benefit on U.S. losses beginning January 1, 2011.61Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)4. Long-term Debt and Short-term BorrowingsNotes payable and long-term debt consisted of the following as of December 31, 2012 and 2011: (in millions of dollars)2012 2011 U.S. Dollar Senior Secured Term Loan B, due May 2019 (floating interest rate of 4.25% at December 31, 2012)$326.8 $— U.S. Dollar Senior Secured Term Loan A, due May 2017 (floating interest rate of 3.32% at December 31, 2012)220.8 — Canadian Dollar Senior Secured Term Loan A, due May 2017 (floating interest rate of 4.26% at December 31, 2012)21.8 — Senior Unsecured Notes, due May 2020 (fixed interest rate of 6.75%)500.0 — Senior Secured Notes, due March 2015, net of discount (fixed interest rate of 10.625%)— 420.9(1) U.S. Dollar Senior Subordinated Notes, due August 2015 (fixed interest rate of 7.625%)— 246.3 Other borrowings2.7 1.8 Total debt1,072.1 669.0 Less: current portion(1.3) (0.2) Total long-term debt$1,070.8 $668.8 (1)Net of unamortized original issue discount of $4.2 million as of December 31, 2011.As of December 31, 2012, there were no borrowings under the $250 million senior secured revolving credit facility. The amount available forborrowings was $238.5 million (allowing for $11.5 million of letters of credit outstanding on that date).On May 1, 2012 we entered into a refinancing in conjunction with the Merger. The refinancing reduced our effective interest rate while increasing ourborrowing capacity and extending the maturities of our credit facilities.The new credit facilities and notes are as follows:•$250 million of U.S. Dollar Senior Secured Revolving Credit Facilities due May 2017•$285 million of U.S. Dollar Senior Secured Term Loan A due May 2017•C$34.5 million of Canadian Dollar Senior Secured Term Loan A due May 2017•$450 million of U.S. Dollar Senior Secured Term Loan B due May 2019•$500 million of U.S. Dollar Senior Unsecured Notes due May 2020Interest rates under the senior secured term loans are based on the London Interbank Offered Rate ("LIBOR"). The range of borrowing costs under thepricing grid is LIBOR plus 3.00% for the Term A loans and LIBOR plus 3.25% with a LIBOR rate floor of 1.00% for the Term B loans. The senior securedcredit facilities had a weighted average interest rate of 3.89% as of December 31, 2012 and the senior unsecured notes have an interest rate of 6.75%.In addition on May 1, 2012 we repurchased or discharged all of our outstanding senior secured notes of $425.1 million, due March 2015, for $464.7million including a premium and related fees of $39.6 million. On May 4, 2012 we redeemed all of our outstanding senior subordinated notes of $246.3million, due August 2015, for $252.6 million including a premium of $6.3 million. We also terminated our senior secured asset-based revolving creditfacility of $175.0 million, which was undrawn as of May 1, 2012. Associated with these transactions were $15.5 million in write-offs for original issuediscount and debt origination costs.In conjunction with our refinancing, we paid $38.5 million in additional bank, legal and advisory fees associated with our new credit facilities. Thesefees were capitalized and are being amortized over the life of the credit facilities and senior unsecured notes.During 2012, we voluntarily repaid $64.2 million of our U.S. Dollar Senior Secured Term Loan A, $12.9 million of our Canadian Dollar SeniorSecured Term Loan A and $123.2 million of our U.S. Dollar Senior Secured Term Loan B.During 2011, we repurchased $34.9 million of our Senior Secured Notes and $25.0 million of our Senior Subordinated Notes. We paid a $3.0 millionpremium on the repurchase of our Senior Secured Notes, which was included in Other expense, net in the Consolidated Statements of Operations62Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)Loan CovenantsWe must meet certain restrictive financial covenants as defined under the senior secured credit facilities. The covenants become more restrictive over timeand require us to maintain certain ratios related to consolidated leverage and consolidated interest coverage. We are also subject to certain customary restrictivecovenants under the senior unsecured notes.The table below sets forth the financial covenant ratio levels under the senior secured credit facilities: Maximum Consolidated LeverageRatio(1) Minimum - Interest CoverageRatio(2)May 1, 2012 to December 31, 2012 4.50:1.00 3.00:1.00January 1, 2013 to December 31, 2013 4.25:1.00 3.00:1.00January 1, 2014 to December 31, 2014 4.00:1.00 3.25:1.00January 1, 2015 to December 31, 2015 3.75:1.00 3.25:1.00January 1, 2016 and thereafter 3.50:1.00 3.50:1.00(1)The leverage ratio is computed by dividing our net indebtedness by the cumulative four-quarter-trailing EBITDA, which excludes transaction,restructuring, integration and other charges up to certain limits as well as other adjustments as defined under the senior secured credit facilities.(2)The interest coverage ratio for any period is the cumulative four-quarter-trailing EBITDA, for the Company, for such period, adjusted as provided in(1), divided by cash interest expense for the Company for such period and other adjustments, all as defined under the senior secured credit facilities.The senior secured credit facilities contain customary events of default, including payment defaults, breach of representations and warranties, covenantdefaults, cross-defaults and cross-accelerations, certain bankruptcy or insolvency events, certain ERISA-related events, changes in control or ownership, andinvalidity of any loan document.The indenture governing the senior unsecured notes does not contain financial performance covenants. However, that indenture does contain covenantsthat limit, among other things, our ability and the ability of our restricted subsidiaries to:•incur additional indebtedness;•pay dividends on our capital stock or repurchase our capital stock;•enter into or permit to exist contractual limits on the ability of our subsidiaries to pay dividends to the Company;•enter into certain transactions with affiliates;•make investments;•create liens; and•sell certain assets or merge with or into other companies.Certain of these covenants will be subject to suspension when and if the notes are rated at least “BBB–” by Standard & Poor’s or at least “Baa3” byMoody’s. Each of the covenants is subject to a number of important exceptions and qualifications.Guarantees and SecurityObligations under the senior secured credit facilities are irrevocably and unconditionally guaranteed, jointly and severally, by certain of our existing andfuture domestic subsidiaries. In the case of the obligations of ACCO Brands Canada its senior secured term loan A is guaranteed by its future subsidiaries and by theCompany's other existing and future Canadian subsidiaries.The senior unsecured notes are irrevocably and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of our existingand future domestic subsidiaries other than certain excluded subsidiaries. The senior unsecured notes and the related guarantees will rank equally in right ofpayment with all of the existing and future senior debt of the Company, Mead Products and the guarantors, senior in right of payment to all of the existing andfuture subordinated debt of the Company, Mead Products and the guarantors, and effectively subordinated to all of the existing and future securedindebtedness of the Company, Mead Products and the guarantors to the extent of the value of the assets securing such indebtedness. The senior unsecurednotes and the guarantees are and structurally subordinated to all existing and future liabilities, including trade payables, of each of the Company's and MeadProducts’ subsidiaries that do not guarantee the notes.63Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)Compliance with Loan CovenantsAs of and for the year ended December 31, 2012, we were in compliance with all applicable loan covenants.5. Pension and Other Retiree BenefitsWe have a number of pension plans, principally in the U.K. and the U.S. The plans provide for payment of retirement benefits, mainly commencingbetween the ages of 60 and 65, and also for payment of certain disability and severance benefits. After meeting certain qualifications, an employee acquires avested right to future benefits. The benefits payable under the plans are generally determined on the basis of an employee’s length of service and earnings. Cashcontributions to the plans are made as necessary to ensure legal funding requirements are satisfied.The Company provides post-retirement health care and life insurance benefits to certain employees and retirees in the U.S. and certain employee groupsoutside of the U.S. These benefit plans for ACCO Brands legacy employees have been frozen to new participants. Many employees and retirees outside of theU.S. are covered by government health care programs.On January 20, 2009, the Company’s Board of Directors approved plan amendments to temporarily freeze our ACCO Brands legacy U.S. pension andnon-qualified supplemental retirement plans effective March 7, 2009. No additional benefits will accrue under these plans after that date until further action bythe Board of Directors. On September 30, 2012 our U.K. pension plan was frozen. The Merger with Mead C&OP has added additional pension and post-retirement plans in the U.S. and Canada. In the U.S. we have added a pensionplan for certain bargained hourly employees of Mead C&OP. In Canada we have assumed the Mead C&OP pension and post-retirement plans for itsCanadian employees.64Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)The following table sets forth our defined benefit pension plans and other post-retirement benefit plans funded status and the amounts recognized in ourconsolidated balance sheets: Pension Benefits Post-retirement U.S. International (in millions of dollars)2012 2011 2012 2011 2012 2011Change in projected benefit obligation(PBO) Projected benefit obligation at beginning ofyear$171.9 $162.5 $284.6 $268.3 $13.4 $13.3Service cost1.2 — 2.1 2.1 0.2 0.2Interest cost8.4 8.6 14.3 14.7 0.6 0.6Actuarial loss19.9 9.5 30.7 14.2 0.1 —Participants’ contributions— — 0.8 0.9 0.2 0.2Benefits paid(12.2) (8.7) (13.2) (13.0) (0.8) (0.9)Curtailment gain— — — (0.6) — —Foreign exchange rate changes— — 13.6 (2.0) 0.2 —Other items0.7 — (0.4) — — —Mead C&OP acquisition1.8 — 28.5 — 2.1 —Projected benefit obligation at end of year191.7 171.9 361.0 284.6 16.0 13.4Change in plan assets Fair value of plan assets at beginning of year119.1 124.8 242.7 242.3 — —Actual return on plan assets19.8 (3.2) 35.5 7.0 — —Employer contributions8.7 6.2 9.9 6.6 0.6 0.7Participants’ contributions— — 0.8 0.9 0.2 0.2Benefits paid(12.2) (8.7) (13.2) (13.0) (0.8) (0.9)Foreign exchange rate changes— — 11.8 (1.1) — —Mead C&OP acquisition— — 24.4 — — —Fair value of plan assets at end of year135.4 119.1 311.9 242.7 — —Funded status (Fair value of plan assets lessPBO)$(56.3) $(52.8) $(49.1) $(41.9) $(16.0) $(13.4)Amounts recognized in the consolidatedbalance sheet consist of: Other current liabilities$— $0.2 $0.5 $0.6 $1.1 $1.2Accrued benefit liability(1)56.3 52.6 48.6 41.3 14.9 12.2Components of accumulated othercomprehensive income, net of tax: Unrecognized prior service cost0.4 — (0.2) 0.4 — —Unrecognized actuarial loss (gain)57.8 56.1 74.2 62.2 (1.1) (2.6)(1)Pension and post-retirement liabilities of $119.8 million as of December 31, 2012, increased from $106.1 million as of December 31, 2011, due to lowerdiscount rates compared to prior year assumptions, partially offset by the over performance of the assets of the pension plans compared to theexpected long-term rate of return of the assets of the pension plans.65Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)Of the amounts included within accumulated other comprehensive income (loss), we expect to recognize the following pre-tax amounts as components ofnet periodic benefit cost during 2013: Pension Benefits Post-retirement(in millions of dollars)U.S. International Prior service cost$0.1 $— $—Actuarial loss (gain)9.6 2.5 (0.7) $9.7 $2.5 $(0.7) All of our plans have projected benefit obligations in excess of plan assets.The accumulated benefit obligation for all defined benefit pension plans was $536.2 million and $443.6 million at December 31, 2012 and 2011,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)2012 2011 2012 2011Projected benefit obligation$191.7 $171.9 $349.6 $272.8Accumulated benefit obligation189.8 171.9 335.3 260.2Fair value of plan assets135.4 119.1 300.6 230.9The components of net periodic benefit cost for pension and post-retirement plans for the years ended December 31, 2012, 2011, and 2010, respectively,were as follows: Pension Benefits Post-retirement U.S. International (in millions of dollars)2012 2011 2010 2012 2011 2010 2012 2011 2010Service cost$1.2 $— $— $2.1 $2.1 $2.3 $0.2 $0.2 $0.2Interest cost8.4 8.6 8.9 14.3 14.7 14.6 0.6 0.6 0.7Expected return on plan assets(10.4) (10.7) (10.4) (16.2) (16.0) (15.1) — — —Amortization of prior servicecost— — — 0.4 0.2 0.1 — — —Amortization of net loss (gain)6.2 4.3 3.0 2.2 3.9 4.8 (1.6) (0.6) (0.9)Curtailment— — — — (0.2) — — — —Settlement loss0.7 — — — — — — — —Net periodic benefit cost$6.1 $2.2 $1.5 $2.8 $4.7 $6.7 $(0.8) $0.2 $—During the second quarter of 2012, due to of the Merger, we settled the Amended and Restated ACCO Brands Corporation Supplemental Retirement Plan(the "SRP"), which resulted in a settlement charge of $0.7 million. The SRP provided that the accrued vested benefit of each participant be paid in an actuarialequivalent lump sum upon the occurrence of a change of control (as defined in the SRP).During the first quarter of 2012, we changed the amortization of our net loss included in accumulated other comprehensive income (loss) for our U.K.pension plan from the average remaining service period of active employees expected to receive benefits under the plan to the average remaining life expectancyof the inactive participants. This change was the result of decreases in plan participation resulting in substantially all of the participants now being inactive.This change reduced the net periodic benefit cost by approximately $3.3 million for the year ended December 31, 2012.66Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)Other changes in plan assets and benefit obligations that were recognized in other comprehensive income (loss) during the years ended December 31,2012, 2011, and 2010 were as follows: Pension Benefits Post-retirement U.S. International (in millions of dollars)2012 2011 2010 2012 2011 2010 2012 2011 2010Current year actuarial loss(gain)$9.6 $23.5 $(0.2) $11.4 $22.8 $(4.2) $0.1 $— $—Amortization of actuarial (loss)gain(6.2) (4.3) (3.0) (2.2) (3.9) (4.8) 1.6 0.6 0.9Current year prior service cost(income)0.8 — — (0.3) — — — — —Amortization of prior servicecost— — — (0.4) (0.2) (0.1) — — —Exchange rate adjustment— — — 4.1 (1.0) (3.2) (0.1) — 0.1Total recognized in othercomprehensive income (loss)$4.2 $19.2 $(3.2) $12.6 $17.7 $(12.3) $1.6 $0.6 $1.0Total recognized in net periodicbenefit cost and othercomprehensive income (loss)$10.3 $21.4 $(1.7) $15.4 $22.4 $(5.6) $0.8 $0.8 $1.0 AssumptionsWeighted average assumptions used to determine benefit obligations for the years ended December 31, 2012, 2011, and 2010 were as follows: Pension Benefits Post-retirement U.S. International 2012 2011 2010 2012 2011 2010 2012 2011 2010Discount rate4.2% 5.0% 5.5% 4.3% 4.7% 5.4% 4.0% 4.5% 5.0%Rate of compensation increaseN/A N/A N/A 4.0% 3.6% 4.4% — — —Weighted average assumptions used to determine net cost for the years ended December 31, 2012, 2011, and 2010 were as follows: Pension Benefits Post-retirement U.S. International 2012 2011 2010 2012 2011 2010 2012 2011 2010Discount rate5.0% 5.5% 5.9% 4.7% 5.4% 5.8% 4.5% 5.0% 5.9%Expected long-term rate ofreturn8.2% 8.2% 8.2% 6.2% 6.4% 6.8% — — —Rate of compensation increaseN/A N/A N/A 3.6% 4.4% 4.5% — — —67Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)Weighted average health care cost trend rates used to determine post-retirement benefit obligations and net cost as of December 31, 2012, 2011, and 2010were as follows: Post-retirement Benefits 2012 2011 2010Health care cost trend rate assumed for next year7% 7% 8%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 rate2020 2020 2020Assumed health care cost trend rates may have a significant effect on the amounts reported for the health care plans. A one-percentage-point change inassumed health care cost trend rates would have the following effects: 1-Percentage- 1-Percentage-(in millions of dollars)Point Increase Point DecreaseIncrease (decrease) on total of service and interest cost$0.1 $(0.2)Increase (decrease) on post-retirement benefit obligation1.6 (1.4)Plan AssetsThe 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 the underlyingliability structure. The target asset allocation for our U.S. plan is 65% in equity securities, 20% in fixed income securities and 15% in alternative assets. Thetarget asset allocation for non-U.S. plans is set by the local plan trustees. Our pension plan weighted average asset allocations as of December 31, 2012 and 2011 were as follows: 2012 2011 U.S. International U.S. InternationalAsset category Equity securities64% 47% 63% 48%Fixed income30 39 32 42Real estate— 4 — 4Other(1) 6 10 5 6Total100% 100% 100% 100% (1)Insurance contracts, multi-strategy hedge funds and cash and cash equivalents for certain of our plans.68Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)U.S. Pension Plan AssetsFair value measurements of our U.S. pension plan assets by asset category as of December 31, 2012 were as follows: (in millions of dollars)Quoted Pricesin ActiveMarkets forIdenticalAssets(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) Fair Valueas ofDecember 31,2012Common stocks$8.1 $— $— $8.1Mutual funds79.1 — — 79.1Common collective trust funds— 8.0 — 8.0Government debt securities— 4.4 — 4.4Corporate debt securities— 11.2 — 11.2Asset-backed securities— 8.6 — 8.6Multi-strategy hedge funds— 6.2 — 6.2Government mortgage-backed securities— 4.2 — 4.2Collateralized mortgage obligations, mortgage backed securities,and other— 5.6 — 5.6Total$87.2 $48.2 $— $135.4 Fair value measurements of our U.S. pension plan assets by asset category as of December 31, 2011 were as follows: (in millions of dollars)Quoted Pricesin ActiveMarkets forIdenticalAssets(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) Fair Valueas ofDecember 31,2011Common stocks$6.9 $— $— $6.9Mutual funds68.3 — — 68.3Government debt securities— 10.9 — 10.9Corporate debt securities— 8.0 — 8.0Asset-backed securities— 7.8 — 7.8Multi-strategy hedge funds— 5.4 — 5.4Government mortgage-backed securities— 4.0 — 4.0Common collective trust funds, collateralized mortgageobligations, mortgage backed securities, and other fixedincome securities— 7.8 — 7.8Total$75.2 $43.9 $— $119.1Mutual funds and common stocks: The fair values of mutual fund and common stock fund investments are determined by obtaining quoted prices onnationally recognized securities exchanges (level 1 inputs).Debt securities: Fixed income securities, such as corporate and government bonds, collateralized mortgage obligations, asset-backed securities, andother debt securities are valued using quotes from independent pricing vendors based on recent trading activity and other relevant information, includingmarket interest rate curves, referenced credit spreads, and estimated prepayment rates, where applicable (level 2 inputs).Multi-strategy hedge funds: The fair values of participation units held in multi-strategy hedge funds are based on their net asset values, as reported bythe managers of the funds and are based on the daily closing prices of the underlying investments (level 2 inputs).69Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)Common collective trusts: The fair values of participation units held in common collective trusts are based on their net asset values, as reported by themanagers of the common collective trusts and as supported by the unit prices of actual purchase and sale transactions occurring as of or close to the financialstatement date (level 2 inputs).International Pension Plans AssetsFair value measurements of our international pension plans assets by asset category as of December 31, 2012 were as follows: (in millions of dollars)Quoted Pricesin ActiveMarkets forIdenticalAssets(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) Fair Valueas ofDecember 31,2012Cash and cash equivalents$4.3 $— $— $4.3Equity securities130.5 15.8 — 146.3Corporate debt securities— 103.6 — 103.6Multi-strategy hedge funds— 15.0 — 15.0Insurance contracts— 12.2 — 12.2Other debt securities— 10.3 — 10.3Real estate— 9.9 1.0 10.9Government debt securities— 9.3 — 9.3Total$134.8 $176.1 $1.0 $311.9 Fair value measurements of our international pension plans assets by asset category as of December 31, 2011 were as follows: (in millions of dollars)Quoted Pricesin ActiveMarkets forIdenticalAssets(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) Fair Valueas ofDecember 31,2011Cash and cash equivalents$3.2 $— $— $3.2Equity securities116.6 — — 116.6Corporate debt securities— 82.6 — 82.6Real estate— 10.0 — 10.0Insurance contracts— 9.7 — 9.7Other debt securities— 9.7 — 9.7Government debt securities— 9.0 — 9.0Multi-strategy hedge funds— 1.9 — 1.9Total$119.8 $122.9 $— $242.7Equity securities: The fair values of equity securities are determined by obtaining quoted prices on nationally recognized securities exchanges (level 1inputs).Debt securities: Fixed income securities, such as corporate and government bonds and other debt securities consisting of index linked securities. Thesedebt securities are valued using quotes from independent pricing vendors based on recent trading activity and other relevant information, including marketinterest rate curves, referenced credit spreads, and estimated prepayment rates, where applicable (level 2 inputs).Real estate: Real estate, exclusive of the Canadian plan, consists of managed real estate investment trust securities (level 2 inputs). Real estate in theCanadian plan was acquired in the Merger of Mead C&OP and the properties are appraised by a third party on an annual basis (level 3 inputs). There havebeen no substantial purchases or gain/losses since the Merger.70Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)Insurance contracts: Valued at contributions made, plus earnings, less participant withdrawals and administrative expenses, which approximate fairvalue (level 2 inputs).Multi-strategy hedge funds: The fair values of participation units held in multi-strategy hedge funds are based on their net asset values, as reported bythe managers of the funds and are based on the daily closing prices of the underlying investments (level 2 inputs).Cash ContributionsWe contributed $19.2 million to our defined benefit plans in 2012, including $3.3 million for the settlement of the SRP.We expect to contribute $14.3 million to our defined benefit plans in 2013. The following table presents estimated future benefit payments for the next ten fiscal years: Pension Post-retirement(in millions of dollars)Benefits Benefits2013$21.5 $1.12014$22.3 $1.22015$22.7 $1.12016$23.3 $1.12017$24.0 $1.1Years 2018 — 2022$125.8 $4.9We also sponsor a number of defined contribution plans. Contributions are determined under various formulas. Costs related to such plans amounted to$8.0 million, $6.6 million and $6.1 million for the years ended December 31, 2012, 2011, and 2010, respectively. The $1.4 million increase in definedcontribution plan costs in 2012 compared to 2011 was due to the Merger with Mead C&OP.6. Stock-Based CompensationWe have two share-based compensation plans under which a total of 15,665,000 shares may be issued under awards to key employees and non-employee directors.The following table summarizes the impact of all stock-based compensation expense on our consolidated statements of operations for the years endedDecember 31, 2012, 2011 and 2010. (in millions of dollars)2012 2011 2010Advertising, selling, general and administrative expense$9.2 $6.3 $4.2Income from continuing operations before income tax9.2 6.3 4.2Income tax expense3.3 0.2 0.2Net income$5.9 $6.1 $4.0There was no capitalization of stock based compensation expense.71Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)Stock-based compensation expense by award type (including stock options, stock-settled appreciation rights (“SSARs”), restricted stock units(“RSUs”) and performance stock units (“PSUs”)) for the years ended December 31, 2012, 2011 and 2010 are as follows: (in millions of dollars)2012 2011 2010Stock option compensation expense$1.8 $0.6 $0.4SSAR compensation expense0.1 0.2 0.2RSU compensation expense3.9 3.0 2.8PSU compensation expense3.4 2.5 0.8Total stock-based compensation$9.2 $6.3 $4.2Stock Option and SSAR AwardsThe exercise price of each stock option and SSAR equals or exceeds the fair market price of our stock on the date of grant. Options/SSARs can generallybe exercised over a maximum term of up to seven years. Stock options/SSARs outstanding as of December 31, 2012 generally vest ratably over three years.There were no SSAR or option awards issued during 2010. During 2011 and 2012, we granted only option awards. The fair value of each option/SSAR grantis estimated on the date of grant using the Black-Scholes option-pricing model using the weighted average assumptions as outlined in the following table: Year Ended December 31, 2012 2011Weighted average expected lives4.5years 4.5yearsWeighted average risk-free interest rate0.75% 1.65%Weighted average expected volatility55.7% 50.7%Expected dividend yield0.0% 0.0%Weighted average grant date fair value$5.41 $3.85 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/SSAR todetermine volatility assumptions for stock-based compensation prior to 2012. Beginning with 2012 volatility is calculated using a combination of peercompanies (50%) and ACCO Brands' historic volatility (50%). The weighted average expected option/SSAR term reflects the application of the simplifiedmethod, which defines the life as the average of the contractual term of the option/SSAR and the weighted average vesting period for all option tranches. Therisk-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. Forfeitures are estimated at thetime of grant in order to calculate the amount of share-based payment awards ultimately expected to vest. The forfeiture rate is based on historical rates.A summary of the changes in stock options/SSARs outstanding under the Company’s stock compensation plans during the year ended December 31,2012 is presented below: NumberOutstanding WeightedAverageExercisePrice Weighted AverageRemainingContractual Term AggregateIntrinsicValueOutstanding at December 31, 20116,108,456 $12.23 Granted698,526 $11.83 Exercised(297,446) $1.58 Lapsed(1,630,983) $20.28 Outstanding at December 31, 20124,878,553 $10.12 3.2 years $9.7 millionExercisable shares at December 31, 20123,796,756 $9.95 2.4 years $9.7 millionOptions/SSARs vested or expected to vest4,814,335 $10.12 3.1 years $9.7 millionWe received cash of $0.2 million and $0.1 million from the exercise of stock options for the years ended December 31, 2012 and 2011, respectively. Theaggregate intrinsic value of options exercised during the years ended December 31, 2012 and 2011,72Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)were not significant. No stock options were exercised in 2010. The aggregate intrinsic value of SSARs exercised during the years ended December 31, 2012,2011 and 2010 totaled $2.5 million, $3.0 million and $2.1 million, respectively. The fair value of options and SSARs vested during the years endedDecember 31, 2012, 2011 and 2010 was $1.0 million, $0.6 million and $1.1 million, respectively. As of December 31, 2012, we had unrecognizedcompensation expense related to stock options of $3.7 million, which will be recognized over a weighted-average period of 2.1 years.Stock Unit AwardsThe ACCO Brands Corporation 2011 Amended and Restated ACCO Brands Corporation Incentive Plan provides for stock based awards in the form ofRSUs, PSUs, incentive and non-qualified stock options, and stock appreciation rights, any of which may be granted alone or with other types of awards anddividend equivalents. RSUs vest over a pre-determined period of time, generally three to four years from the date of grant. Stock-based compensation expensefor the years ended December 31, 2012, 2011 and 2010 includes $0.9 million, $0.6 million and $0.7 million, respectively, of expense related to RSUs grantedto non-employee directors, which became fully vested on the grant date. PSUs also vest over a pre-determined period of time, minimally three years, but arefurther subject 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.There were 1,428,592 RSUs outstanding at December 31, 2012. All outstanding RSUs as of December 31, 2012 vest within four years of their date ofgrant. Also outstanding at December 31, 2012 were 1,571,005 PSUs. All outstanding PSUs as of December 31, 2012 vest at the end of their respectiveperformance periods subject to achievement of the performance targets associated with such awards. Upon vesting, all of the remaining PSU awards will beconverted into the right to receive one share of common stock of the Company for each unit that vests. The cost of these awards is determined using the fairvalue of the shares on the date of grant, and compensation expense is generally recognized over the period during which the employees provide the requisiteservice to the Company. We generally recognize compensation expense for our PSU awards ratably over the performance period based on management’sjudgment of the likelihood that performance measures will be attained. We generally recognize compensation expense for our RSU awards ratably over theservice period.A summary of the changes in the stock unit awards outstanding under our equity compensation plans during 2012 is presented below: StockUnits WeightedAverageGrantDate FairValueOutstanding at December 31, 20112,391,360 $8.80Granted1,536,779 $11.54Vested(453,831) $11.11Forfeited and cancelled(474,711) $9.25Outstanding at December 31, 20122,999,597 $9.78The weighted-average grant date fair value of our stock unit awards was $11.54, $8.73, and $7.06 for the years ended December 31, 2012, 2011 and2010, respectively. The fair value of stock unit awards that vested during the years ended December 31, 2012, 2011 and 2010 was $5.0 million, $2.5 millionand $1.3 million, respectively. As of December 31, 2012, the Company had unrecognized compensation expense related to RSUs and PSUs of $7.2 millionand $7.8 million, respectively. The unrecognized compensation expense related to RSUs and PSUs will be recognized over a weighted-average period of 2.3years and 1.8 years, respectively.We will satisfy the requirement for delivering the common shares for stock-based plans by issuing new shares.73Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)7. InventoriesInventories are stated at the lower of cost or market value. The components of inventories were as follows: December 31,(in millions of dollars)2012 2011Raw materials$40.1 $23.9Work in process5.4 3.6Finished goods220.0 170.2Total inventories$265.5 $197.7 8. Property, Plant and EquipmentProperty, plant and equipment, net consisted of: December 31,(in millions of dollars)2012 2011Land and improvements$27.5 $13.6Buildings and improvements to leaseholds151.3 115.5Machinery and equipment379.2 321.7Construction in progress33.4 12.5 591.4 463.3Less: accumulated depreciation(317.8) (316.1)Property, plant and equipment, net(1)$273.6 $147.2 (1)Net property, plant and equipment as of December 31, 2012 and 2011 contained $26.9 million and $24.9 million of computer software assets, whichare classified within machinery and equipment and construction in progress. Amortization of software costs was $8.4 million, $9.5 million and$10.1 million for the years ended December 31, 2012, 2011 and 2010, respectively.9. Goodwill and Identifiable Intangible AssetsGoodwillChanges in the net carrying amount of goodwill by segment were as follows: (in millions of dollars)ACCOBrandsNorth America ACCOBrandsInternational ComputerProductsGroup Total Balance at December 31, 2010$78.0(1) $52.1(1) $6.8 $136.9 Translation(0.2) (1.7) — (1.9) Balance at December 31, 201177.8 50.4 6.8 135.0 Mead C&OP acquisition318.7 144.7 — 463.4 Translation(0.2) (8.8) — (9.0) Balance at December 31, 2012$396.3 $186.3 $6.8 $589.4 Goodwill$527.2 $270.5 $6.8 $804.5 Accumulated impairment losses(130.9) (84.2) — (215.1) Balance at December 31, 2012$396.3 $186.3 $6.8 $589.4(1) We implemented certain organizational changes in conjunction with the Merger. Effective as of the second quarter of 2012, our former ACCO BrandsAmericas segment became ACCO Brands North America as the pre-acquisition Latin America74Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)business was moved into the ACCO Brands International segment. Goodwill associated with our legacy ACCO Brands Latin America business istherefore now included in the ACCO Brands International segment.The authoritative guidance on goodwill and other intangible assets requires that goodwill be tested for impairment at a reporting unit level. We havedetermined that our reporting units are ACCO Brands North America, ACCO Brands International and Computer Products Group segments. We test goodwillfor impairment annually and whenever events or circumstances make it more likely than not that an impairment may have occurred. During 2012, we adoptedASU No. 2011-08, Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment. ASU No. 2011-08 permits entities to first assessqualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determiningwhether it is necessary to perform the two-step goodwill impairment test included in U.S. GAAP. Entities are not required to calculate the fair value of areporting unit unless they determine that it is more likely than not that the fair value is less than the carrying amount. We concluded that it was not necessaryto apply the traditional two-step fair value quantitative impairment test in ASC 350 to any of our reporting units in 2012. When applying a fair-value-basedtest, if it is determined to be required, the fair value of a reporting unit is compared to its carrying value. If the fair value of a reporting unit exceeds thecarrying value of the net assets assigned to a reporting unit, goodwill is considered not impaired and no further testing is required. If the carrying value of thenet assets assigned to a reporting unit exceeds the fair value of a reporting unit, the second step of the impairment test is performed in order to determine theimplied fair value of a reporting unit’s goodwill. Determining the implied fair value of goodwill requires valuation of a reporting unit’s tangible and intangibleassets and liabilities in a manner similar to the allocation of purchase price in a business combination. If the carrying value of a reporting unit’s goodwillexceeds its implied fair value, goodwill is deemed impaired and is written down to the extent of the difference. Based upon our most recent annual qualitativeimpairment test completed during 2012, it is not more likely than not that the fair value of the reporting units goodwill is less than their carrying amounts.Goodwill has been recorded on our balance sheet related to the Merger and represents the excess of the cost of the acquisition when compared to the fairvalue estimate of the net assets acquired on May 1, 2012 (the date of the Merger). See Note 3, Acquisitions, for details on the preliminary calculation of thegoodwill acquired in the Merger with Mead C&OP.Given the current economic environment and the uncertainties regarding the impact on our business, there can be no assurance that our estimates andassumptions made for purposes of our impairment testing in 2012 will prove to be accurate predictions of the future. If our assumptions regarding forecastedrevenue or margin growth rates are not achieved, we may be required to record additional impairment charges in future periods, whether in connection with ournext annual impairment testing in the second quarter of 2013 or prior to that, if any such change constitutes a triggering event outside of the quarter from whenthe annual impairment test is performed. It is not possible at this time to determine if any such future impairment charge would result or, if it does, whethersuch charge would be material.Identifiable IntangiblesThe identifiable intangible assets of $543.2 million acquired in the Merger with Mead C&OP include trade names and customer relationships and wererecorded at their fair values. The values assigned were based on the estimated future discounted cash flows attributable to the asset. These future cash flowswere estimated based on the historical cash flows and then adjusted for anticipated future changes, primarily expected changes in sales volume or price. Wehave assigned an indefinite life to certain trade names, which include the Five Star®, Mead®, Tilibra and Hilroy brands, based on the Company's intention touse these trade names for an indefinite period of time and the expected sustainability of brands and the product categories and cash flows with which they areassociated. Each of the named brands has a long history of high brand recognition in the markets that it serves, has significant market share in the productcategories in which it competes and has demonstrated strong historical financial performance.The customer relationships and certain trade names will be amortized on an accelerated basis. Definite-lived trade names and customer relationships areexpected to be amortized over lives ranging from 10 to 15 years from the Merger date of May 1, 2012.75Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)The allocations of the acquired identifiable intangibles acquired in the Merger are as follows:(in millions of dollars)Estimated FairValue Estimated AverageRemaining UsefulLifeTrade names - indefinite lived$415.3 IndefiniteTrade names - finite lived50.3 10-15 yearsCustomer relationships77.6 10-15 years $543.2 As of June 1, 2012, $21.4 million of the value previously assigned to one of our legacy indefinite-lived trade names was changed to an amortizableintangible asset. The change was made in respect of decisions regarding our future use of the trade name. We commenced amortizing the trade name in June of2012 on a prospective basis over a life of 30 years.The gross carrying value and accumulated amortization by class of identifiable intangible assets as of December 31, 2012 and 2011 are as follows: December 31, 2012 December 31, 2011(in millions of dollars)GrossCarryingAmounts AccumulatedAmortization NetBookValue GrossCarryingAmounts AccumulatedAmortization NetBookValueIndefinite-lived intangible assets: Trade names$524.9 $(44.5)(1) $480.4 $138.2(2) $(44.5)(1) $93.7Amortizable intangible assets: Trade names130.9(2) (36.7) 94.2 58.0 (27.8) 30.2Customer and contractual relationships103.7 (32.7) 71.0 26.1 (21.5) 4.6Patents/proprietary technology10.4 (9.4) 1.0 10.4 (8.5) 1.9Subtotal245.0 (78.8) 166.2 94.5 (57.8) 36.7Total identifiable intangibles$769.9 $(123.3) $646.6 $232.7 $(102.3) $130.4 (1)Accumulated amortization prior to the adoption of authoritative guidance on goodwill and other intangible assets, at which time further amortizationceased.(2)A trade name with a gross carrying value of $21.4 million has been reclassified to amortizable intangible assets effective in the second quarter of 2012.The Company’s intangible amortization was $19.9 million, $6.3 million and $6.7 million for the years ended December 31, 2012, 2011 and 2010,respectively.Estimated amortization expense for amortizable intangible assets for the next five years is as follows: (in millions of dollars)2013 2014 2015 2016 2017Estimated amortization expense$24.7 $22.2 $19.9 $17.5 $14.3 Actual amounts of amortization expense may differ from estimated amounts due to changes in foreign currency exchange rates, additional intangibleasset acquisitions, impairment of intangible assets, accelerated amortization of intangible assets and other events.10. RestructuringDuring the year 2012, we initiated cost savings plans related to the consolidation and integration of the recently acquired Mead C&OP business. Themost significant of these plans relates to our dated goods business and includes the 2013 closure of a manufacturing and distribution facility in East Texas,Pennsylvania and relocation of its activities to other facilities within the Company. We have also committed to certain cost savings plans that are expected toimprove the efficiency and effectiveness of our U.S. and European businesses, which are independent of any plans related to our acquisition of the MeadC&OP business.76Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)During the year ended December 31, 2012, the Company recorded restructuring charges of $24.3 million. No new restructuring initiatives were expensedin the years ended December 31, 2011 or 2010.A summary of the activity in the restructuring accounts and a reconciliation of the liability for the year ended December 31, 2012 is as follows:(in millions of dollars)Balance at December31, 2011 Provision/ (Income) CashExpenditures Non-cashItems/Currency Change Balance at December31, 2012Employee termination costs$0.3 $24.0 $(9.2) $0.1 $15.2Termination of lease agreements0.7 (0.1) (0.4) — 0.2Other— 0.1 (0.1) — —Sub-total1.0 24.0 (9.7) 0.1 15.4Asset impairments/net loss ondisposal of assets resulting fromrestructuring activities0.2 0.3 (0.3) (0.2) —Total restructuring liability$1.2 $24.3 $(10.0) $(0.1) $15.4Management expects the $15.2 million employee termination costs balance to be substantially paid within the next 12 months. Cash paymentsassociated with lease termination costs of $0.2 million are expected to be paid within the next six months. Not included in the restructuring table above is a $0.1 million net gain on the sale of a manufacturing facility and certain assets in the U.K. The sale,which occurred during the second quarter of 2012, generated net cash proceeds of $2.7 million. The gain on sale has been recognized our ConsolidatedStatements of Operations in selling, general and administrative expenses.A summary of the activity in the restructuring accounts and a reconciliation of the liability for the year ended December 31, 2011 is as follows: (in millions of dollars)Balance at December31, 2010 Provision/ (Income) CashExpenditures Non-cashItems/Currency Change Balance at December31, 2011Employee termination costs$2.2 $(0.6) $(1.4) $0.1 $0.3Termination of lease agreements3.0 (0.5) (1.9) 0.1 0.7Sub-total5.2 (1.1) (3.3) 0.2 1.0Asset impairments/net loss ondisposal of assets resulting fromrestructuring activities— 0.4 (0.1) (0.1) 0.2Total restructuring liability$5.2 $(0.7) $(3.4) $0.1 $1.2 A summary of the activity in the restructuring accounts and a reconciliation of the liability for the year ended December 31, 2010 is as follows: (in millions of dollars)Balance at December31, 2009 Provision/ (Income) CashExpenditures Non-cashItems/Currency Change Balance at December31, 2010Employee termination costs$8.0 $(1.5) $(3.9) $(0.4) $2.2Termination of lease agreements4.4 0.2 (1.5) (0.1) 3.0Sub-total12.4 (1.3) (5.4) (0.5) 5.2Asset impairments/net loss ondisposal of assets resulting fromrestructuring activities— 0.8 — (0.8) —Total restructuring liability$12.4 $(0.5) $(5.4) $(1.3) $5.277Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)In addition to the restructuring described above, in the first quarter of 2011 we initiated plans to rationalize our European operations. The associatedcosts primarily relate to employee terminations, which were accounted for as regular business expenses and were largely offset by associated savings realizedduring the remainder of the 2011 year. These costs totaled $4.5 million during the year ended December 31, 2011 and are included within advertising, selling,general and administrative expenses in the Consolidated Statements of Operations.A summary of the activity in the rationalization charges and a reconciliation of the liability for the year ended December 31, 2011 is as follows: (in millions of dollars)Balance at December31, 2010 Provision CashExpenditures Non-cashItems/Currency Change Balance at December31, 2011Employee termination costs$— $4.5 $(4.2) $0.1 $0.4 The $0.4 million of employee termination costs remaining as of December 31, 2011 were paid in 2012. 11. Income TaxesThe components of income (loss) before income taxes from continuing operations are as follows: (in millions of dollars)2012 2011 2010Domestic operations$(94.9) $(48.6) $(38.5)Foreign operations90.5 91.5 77.0Total$(4.4) $42.9 $38.5The reconciliation of income taxes computed at the U.S. federal statutory income tax rate to our effective income tax rate for continuing operations is asfollows: (in millions of dollars)2012 2011 2010Income tax at U.S. statutory rate$(1.5) $15.0 $13.5State, local and other tax, net of federal benefit(0.6) (1.3) (0.8)U.S. effect of foreign dividends and earnings23.7 11.6 4.9Unrealized foreign currency (loss) gain on intercompany debt(7.7) 0.9 8.6Foreign income taxed at a lower effective rate(7.2) (7.7) (6.7)(Decrease) increase in valuation allowance(145.1) 5.4 15.7U.S. effect of capital gain11.0 — —Correction of deferred tax error on foreign subsidiary0.8 — (2.8)Change in prior year tax estimates(0.4) 1.0 (1.3)Miscellaneous5.6 (0.6) (0.4)Income taxes as reported$(121.4) $24.3 $30.7Effective tax rateNM 56.6% 79.7%For 2012, we recorded an income tax benefit from continuing operations of $121.4 million on a loss before taxes of $4.4 million. The tax benefit for2012 is primarily due to the $145.1 million release of certain valuation allowances.We continually review the need for establishing or releasing valuation allowances on our deferred tax attributes. Due to the acquisition of Mead C&OP inthe second quarter of 2012, we analyzed our need for maintaining valuation reserves against the expected U.S. future tax benefits. Based on our analysis wedetermined that there existed sufficient evidence in the form of future taxable income from the combined operations to release $126.1 million of the valuationallowance that had been previously recorded against the U.S. deferred income tax assets. The resulting deferred tax assets are comprised principally of netoperating loss carryforwards that are expected to be fully realized within the expiration period and other temporary differences. Also, as part78Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)of this ongoing review, valuation allowances were released in certain foreign jurisdictions in the amount of $19.0 million, primarily during the second quarterof 2012, due to the sustained profitability of these businesses.For the year ended December 31, 2011, income tax expense from continuing operations was $24.3 million on income before taxes of $42.9 million. For2010, we recorded income tax expense from continuing operations of $30.7 million on income before taxes of $38.5 million. The high effective rates for 2011and 2010 of 56.6% and 79.7% are due to increases in the valuation allowance of $5.4 million, net of a $2.8 million reversal of a valuation reserve in theU.K., and $15.7 million, respectively. Therefore no tax benefit was being provided on losses incurred in the U.S. and certain foreign jurisdictions wherevaluation allowances were recorded against certain tax benefits. Also contributing to the high effective tax rate for 2010 was an $8.6 million expense recorded toreflect the income tax impact of foreign currency fluctuations on an intercompany debt obligation, partially offset by the benefit of the $2.8 million out-of-period adjustment.The effective tax rates for discontinued operations were 25.6%, 13.4% and 29.6% in 2012, 2011 and 2010, respectively. The lower rate in 2011 reflectsthe benefit of the goodwill tax basis and prior year capital loss carryforwards that reduced the taxable gain on the sale of GBC Fordigraph in Australia.The U.S. federal statute of limitations remains open for the years 2009 and forward. 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 Australia (2008 forward), Brazil(2007 forward), Canada (2006 forward) and the U.K. (2010 forward). We are currently under examination in various foreign jurisdictions.The components of the income tax expense from continuing operations are as follows: (in millions of dollars)2012 2011 2010Current expense Federal and other$6.0 $0.3 $0.6Foreign27.1 19.8 18.1Total current income tax expense33.1 20.1 18.7Deferred (benefit) expense Federal and other(129.5) 4.9 4.8Foreign(25.0) (0.7) 7.2Total deferred income tax (benefit) expense(154.5) 4.2 12.0Total income tax (benefit) expense$(121.4) $24.3 $30.7 79Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)The components of deferred tax assets (liabilities) are as follows: (in millions of dollars)2012 2011Deferred tax assets Compensation and benefits$15.6 $14.7Pension38.5 34.2Inventory5.8 5.4Other reserves18.0 7.2Accounts receivable6.0 3.7Capital loss carryforwards— 10.3Foreign tax credit carryforwards20.5 20.5Net operating loss carryforwards135.2 129.3Miscellaneous6.3 3.3 Gross deferred income tax assets245.9 228.6 Valuation allowance(55.4) (204.3) Net deferred tax assets190.5 24.3Deferred tax liabilities Depreciation(27.3) (2.0)Identifiable intangibles(257.4) (73.0)Unrealized foreign currency gain on intercompany debt(3.3) (10.6) Gross deferred tax liabilities(288.0) (85.6) Net deferred tax liabilities$(97.5) $(61.3)Deferred income taxes are not provided on certain undistributed earnings of foreign subsidiaries that are expected to be permanently reinvested in thosecompanies, which aggregate to approximately $586 million and $517 million as of December 31, 2012 and at 2011, respectively. If these amounts weredistributed to the U.S., in the form of a dividend or otherwise, we would be subject to additional U.S. income taxes. Determination of the amount ofunrecognized deferred income tax liabilities on these earnings is not practicable.At December 31, 2012, $404.5 million of net operating loss carryforwards are available to reduce future taxable income of domestic and internationalcompanies. These loss carryforwards expire in the years 2013 through 2031 or have an unlimited carryover period.We recognize interest and penalties related to unrecognized tax benefits as a component of income taxes in our results of operations. As of December 31,2012, we have accrued $1.4 million for interest and penalties on unrecognized tax benefits.A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: (in millions of dollars)2012 2011 2010Balance at beginning of year$5.5 $5.7 $6.0Additions for tax positions of prior years2.0 0.1 0.2Reductions for tax positions of prior years(1.5) (0.2) (0.5)Settlements— (0.1) —Mead C&OP acquisition50.3 — —Balance at end of year$56.3 $5.5 $5.7 As of December 31, 2012 the amount of unrecognized tax benefits increased to $56.3 million, of which $51.6 million would affect our effective taxrate, if recognized. We expect the amount of unrecognized tax benefits to change within the next twelve months, but these changes are not expected to have asignificant impact on our results of operations or financial position. None of the positions included in the unrecognized tax benefit relate to tax positions forwhich the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility.80Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)Income Tax AssessmentIn connection with our May 1, 2012 acquisition of Mead C&OP, we assumed all of the tax liabilities for the acquired foreign operations. In December of2012, the Federal Revenue Department of the Ministry of Finance of Brazil ("FRD") issued a tax assessment against our newly acquired indirect subsidiary,Tilibra Produtos de Papelaria Ltda. ("Tilibra"), which challenged the goodwill recorded in connection with the 2004 acquisition of Tilibra. This assessmentdenied the deductibility of that goodwill from Tilibra's taxable income for the year 2007. The assessment seeks payment of approximately R$26.9 million($13.2 million based on current exchange rates) of tax, penalties and interest.In January of 2013, Tilibra filed a protest disputing the tax assessment at the first administrative level of appeal within the FRD. We believe that we havemeritorious defenses and intend to vigorously contest this matter, however, there can be no assurances that we will ultimately prevail. We are in the early stagesof the process to challenge the FRD's tax assessment, and the ultimate outcome will not be determined until the Brazilian tax appeal process is complete, whichis expected to take many years. In addition, Tilibra's 2008-2012 tax years remain open and subject to audit, and there can be no assurances that we will notreceive additional tax assessments regarding the goodwill deducted for the Tilibra acquisition for one or more of those years, which could increase theCompany's exposure to a total of approximately $44.5 million (based on current exchange rates), including interest and penalties which have accumulated todate. If the FRD's initial position is ultimately sustained, the amount assessed would adversely affect our reported cash flow in the year of settlement.Because there is no settled legal precedent on which to base a definitive opinion as to whether we will ultimately prevail, the Company considers theoutcome of this dispute to be uncertain. Since it is not more likely than not that we will prevail, in the fourth quarter of 2012, we recorded a reserve in theamount of $44.5 million in consideration of this matter, of which $43.3 million was recorded as an adjustment to the allocation of the purchase price for thefair value of non-current liabilities assumed as of the acquisition date and was recorded as an increase to goodwill. In addition, the Company will continue toaccrue interest related to this matter until such time as the outcome is known or until evidence is presented that we are more likely than not to prevail. During2012, the Company accrued $1.2 million of additional interest that has accumulated since the date of the acquisition as a charge to current income tax expense.12. Earnings per ShareTotal outstanding shares as of December 31, 2012 and 2011 were 113.1 million and 55.5 million, respectively. The calculation of basic earnings percommon share is based on the weighted average number of common shares outstanding in the year, or period, over which they were outstanding. Ourcalculation of diluted earnings per common share assumes that any common shares outstanding were increased by shares that would be issued upon exerciseof those stock units for which the average market price for the period exceeds the exercise price; less, the shares that could have been purchased by theCompany with the related proceeds, including compensation expense measured but not yet recognized, net of tax. (in millions)2012 2011 2010Weighted-average number of common shares outstanding — basic94.1 55.2 54.8Stock options0.1 0.1 0.1Stock-settled stock appreciation rights0.9 1.7 2.1Restricted stock units1.0 0.6 0.2Adjusted weighted-average shares and assumed conversions — diluted96.1 57.6 57.2Awards of shares representing approximately 5.4 million, 4.3 million and 4.1 million as of December 31, 2012, 2011 and 2010, respectively, ofpotentially dilutive shares of common stock were outstanding and are not included in the computation of dilutive earnings per share as their effect would havebeen anti-dilutive because their exercise prices were higher than the average market price during the period.13. Derivative Financial InstrumentsWe are exposed to various market risks, including changes in foreign currency exchange rates and interest rate changes. We enter into financialinstruments to manage and reduce the impact of these risks, not for trading or speculative purposes. The counterparties to these financial instruments aremajor financial institutions. We continually monitor our foreign currency exposures in order to maximize the overall effectiveness of our foreign currency hedgepositions. Principal currencies hedged include the81Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)U.S. dollar, Euro, Australian dollar, Canadian dollar and Pound sterling. We are subject to credit risk, which relates to the ability of counterparties to meettheir contractual payment obligations or the potential non-performance by counterparties to financial instrument contracts. Management continues to monitorthe status of our counterparties and will take action, as appropriate, to further manage our counterparty credit risk. There are no credit contingency features inour derivative financial instruments.On the date in which we enter into a derivative, the derivative is designated as a hedge of the identified exposure. We measure the effectiveness of ourhedging relationships both at hedge inception and on an ongoing basis. Forward Currency ContractsWe enter into forward foreign currency contracts to reduce the effect of fluctuating foreign currencies, primarily on foreign denominated inventorypurchases and intercompany loans. The majority of the Company’s exposure to local currency movements is in Europe, Australia, Canada, Brazil, Mexicoand Japan.Forward currency contracts are used to hedge foreign denominated inventory purchases for Europe, Australia, Canada and Japan and are designated ascash flow hedges. Unrealized gains and losses on these contracts for inventory purchases are deferred in other comprehensive income (loss) until the contractsare settled and the underlying hedged transactions are recognized, at which time the deferred gains or losses will be reported in the “Cost of products sold” linein the Consolidated Statements of Operations. As of December 31, 2012 and December 31, 2011, the Company had cash flow designated foreign exchangecontracts outstanding with a U.S. dollar equivalent notional value of $85.0 million and $71.9 million, respectively.Forward currency contracts used to hedge foreign denominated intercompany loans are not designated as hedging instruments. Gains and losses on thesederivative instruments are recognized within "Other expense, net" in the Consolidated Statements of Operations and are largely offset by the changes in the fairvalue of the hedged item. The periods of the forward foreign exchange contracts correspond to the periods of the hedged transactions, and do not extend beyond2013. As of December 31, 2012 and 2011, we have undesignated foreign exchange contracts outstanding with a U.S. dollar equivalent notional value of $90.4million and $75.6 million, respectively.The following table summarizes the fair value of our derivative financial instruments as of December 31, 2012 and 2011, respectively. Fair Value of Derivative Instruments Derivative Assets Derivative Liabilities(in millions of dollars)Balance SheetLocation December 31, 2012 December 31, 2011 Balance SheetLocation December 31, 2012 December 31, 2011Derivatives designated ashedging instruments: Foreign exchange contractsOther currentassets $0.7 $3.0 Other currentliabilities $0.6 $0.2Derivatives not designated ashedging instruments: Foreign exchange contractsOther currentassets 0.5 0.8 Other currentliabilities 0.2 1.2Total derivatives $1.2 $3.8 $0.8 $1.4 The following tables summarizes the pre-tax effect of the Company’s derivative financial instruments on the Consolidated Statements of Operations forthe years ended December 31, 2012, 2011 and 2010 respectively. The Effect of Derivative Instruments in Cash Flow Hedging Relationships on the Consolidated Statements of Operationsfor the Years Ended December 31, Amount of Gain (Loss) Recognized inOCI (Effective Portion) Location of (Gain) LossReclassified from OCI to Income Amount of (Gain) LossReclassified from AOCI to Income(Effective Portion)(in millions of dollars)2012 2011 2010 2012 2011 2010Cash flow hedges: Foreign exchange contracts(0.2) $(0.3) $(3.1) Cost of products sold $(1.9) $4.4 $0.8 82Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) The Effect of Derivatives Not Designated as Hedging Instrumentson the Consolidated Statements of Operations Location of (Gain) Loss Recognized inIncome on Derivatives Amount of (Gain) LossRecognized in Income year ended December 31,(in millions of dollars) 2012 2011 2010Foreign exchange contractsOther expense, net $2.3 $0.9 $(1.8)14. Fair Value of Financial InstrumentsIn establishing a fair value, there is a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The basis of thefair value measurement is categorized in three levels, in order of priority, as described below: Level 1Unadjusted quoted prices in active markets for identical assets or liabilitiesLevel 2Unadjusted quoted prices in active markets for similar assets or liabilities, or Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or Inputs other than quoted prices that are observable for the asset or liabilityLevel 3Unobservable inputs for the asset or liabilityWe utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level ofinput that is significant to the fair value measurement. We have determined that our financial assets and liabilities are Level 2 in the fair value hierarchy. The following table sets forth our financial assets andliabilities that were accounted for at fair value on a recurring basis as of December 31, 2012 and 2011, respectively: (in millions of dollars)December 31, 2012 December 31, 2011Assets: Forward currency contracts$1.2 $3.8Liabilities: Forward currency contracts$0.8 $1.4Our forward currency contracts are included in "Other current assets" or "Other current liabilities" and mature within 12 months. The forward foreigncurrency exchange contracts are primarily valued based on the foreign currency spot and forward rates quoted by the banks or foreign currency dealers. Assuch, these derivative instruments are classified within Level 2.The fair values of cash and cash equivalents, notes payable to banks, accounts receivable and accounts payable approximate carrying amounts dueprincipally to their short maturities. The carrying amount of total debt was $1,072.1 million and $669.0 million and the estimated fair value of total debt was$1,097.5 million and $727.2 million at December 31, 2012 and 2011, respectively. The fair values are determined from quoted market prices, whereavailable, and from investment bankers using current interest rates considering credit ratings and the remaining terms of maturity.83Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)15. Accumulated Other Comprehensive Income (Loss)Comprehensive income is defined as net income (loss) and other changes in stockholders’ equity from transactions and other events from sources otherthan stockholders. The components of, and changes in, accumulated other comprehensive income (loss) were: (in millions of dollars)DerivativeFinancialInstruments ForeignCurrencyAdjustments UnrecognizedPension and OtherPost-retirementBenefit Costs AccumulatedOtherComprehensiveIncome (Loss)Balance at December 31, 2010$(1.5) $(2.1) $(82.5) $(86.1)Changes during the year (net of taxes of $3.1)3.7 (15.0) (33.6) (44.9)Balance at December 31, 20112.2 (17.1) (116.1) (131.0)Changes during the year (net of taxes of $6.3)(2.1) (10.9) (12.1) (25.1)Balance at December 31, 2012$0.1 $(28.0) $(128.2) $(156.1)16. Information on Business SegmentsIn conjunction with the Merger during the second quarter of 2012, we realigned our Americas and International segments. The pre-acquisition LatinAmerica business has been moved into the International segment along with Mead C&OP's Brazilian operations. Our Computer Products Group wasunaffected by the realignment or the Merger.Our three business segments are described below.ACCO Brands North America and ACCO Brands InternationalOn May 1, 2012, we implemented certain organizational changes in our business segments in conjunction with the Merger with Mead C&OP. Effectiveas of the second quarter of 2012, the Company's former ACCO Brands Americas segment became ACCO Brands North America as the Company's pre-acquisition Latin America business was moved into the ACCO Brands International segment. These two segments manufacture, source and sell traditionaloffice products, school supplies, calendar products and document finishing solutions. ACCO Brands North America comprises the U.S. and Canada, andACCO Brands International comprises the rest of the world, principally Europe, Australia, Latin America and Asia-Pacific. Prior periods have been restatedfor comparability.As discussed in Note 1, Basis of Presentation, during the second quarter of 2011 the Company sold GBC Fordigraph which was formerly part of theACCO Brands International segment and is included in the financial statement caption “Discontinued Operations.” The ACCO Brands International segmentis now presented on a continuing operations basis excluding GBC Fordigraph.Our office, school and calendar product lines use name brands such as: AT-A-GLANCE®, Day-Timer®, Five Star®, GBC®, Hilroy®, Marbig, Mead®,NOBO, Quartet®, Rexel, Swingline®, Tilibra®, Wilson Jones® and many others. Products and brands are not confined to one channel or product categoryand are sold based on end-user preference in each geographic location. We manufacture approximately 50% of our products, and specify and sourceapproximately 50% of our products, mainly from Asia. The majority of our office products, such as stapling, binding and laminating equipment and relatedconsumable supplies, shredders and whiteboards, are used by businesses. Most of these end-users purchase their products from our customers, whichinclude commercial contract stationers, mass merchandisers, retail superstores, wholesalers, resellers, mail order and internet catalogs, club stores anddealers. We also supply some of our products directly to large commercial and industrial end-users. For all of our products, historically, we have targeted thepremium end of the product categories in which we compete. However, we also supply private label products for our customers and provide machinemaintenance and certain repair services. Our school products include notebooks, folders, decorative calendars, and stationery products. We distribute ourschool products primarily through traditional and online retail mass market, grocery, drug and office superstore channels. Our calendar products are soldthroughout all channels where we sell office or school products, and we also sell calendar products direct to consumers.The customer base to which we sell our products is mainly made up of large global and regional resellers of our products. Mass and retail channelsmainly sell to individual consumers but also to small businesses. Office superstores mainly sell to84Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)commercial customers but also to individual consumers at their retail stores. As a result, there is no clear correlation between product, consumer or distributionchannel. We also sell to commercial contract stationers, wholesalers, distributors, mail order and internet catalogs, and independent dealers. Over half of ourproduct sales by our customers are to business end-users, who generally seek premium products that have added value or ease-of-use features and a reputationfor reliability, performance and professional appearance. Some of our document finishing products are sold directly to high-volume end-users and commercialreprographic centers.Computer Products GroupThe Computer Products Group designs, distributes, markets and sells accessories for laptop and desktop computers and tablets and smartphones.These accessories primarily include security products, iPad® covers and keypads, smartphone accessories, power adapters, input devices such as mice,laptop computer carrying cases, hubs, docking stations and ergonomic devices. The Computer Products Group sells mostly under the Kensington®,Microsaver® and ClickSafe® brand names, with the majority 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 distributed fromour regional facilities. Our computer products are sold primarily to consumer electronics retailers, information technology value-added resellers, originalequipment manufacturers and office products retailers.Financial information by reportable segment is set forth below.Net sales by business segment for the years ended December 31, 2012, 2011 and 2010 are as follows: (in millions of dollars)2012 2011 2010ACCO Brands North America$1,028.2 $623.1 $631.6ACCO Brands International551.2 505.0 476.0Computer Products Group179.1 190.3 177.0Net sales$1,758.5 $1,318.4 $1,284.6 Operating income by business segment for the years ended December 31, 2012, 2011 and 2010 are as follows (a): (in millions of dollars)2012 2011 2010ACCO Brands North America$86.2 $37.4 $44.2ACCO Brands International62.0 58.9 43.6Computer Products Group35.9 47.1 43.0Segment operating income184.1 143.4 130.8Corporate(44.8) (28.2) (21.1)Operating income139.3 115.2 109.7Interest expense, net89.3 77.2 78.3Equity in earnings of joint ventures(6.9) (8.5) (8.3)Other expense, net61.3 3.6 1.2Income (loss) from continuing operations before income tax$(4.4) $42.9 $38.5 (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 andadministrative expenses; iv) less amortization of intangibles; and v) less restructuring.85Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)Segment assets:The following table presents the measure of segment assets used by the Company’s chief operating decision maker. December 31, 2012 2011(in millions of dollars) ACCO Brands North America (b)$505.1 $272.9ACCO Brands International (b)486.4 282.2Computer Products Group (b)90.3 85.5 Total segment assets1,081.8 640.6Unallocated assets1,424.5 468.9Corporate (b)1.4 7.2Total assets$2,507.7 $1,116.7 (b)Represents total assets, excluding: goodwill and identifiable intangibles resulting from business acquisitions, intercompany balances, cash, deferred taxes, prepaid pensionassets, prepaid debt issuance costs and joint ventures accounted for on an equity basis.As a supplement to the presentation of segment assets presented above, the table below presents segment assets, including the allocation of identifiableintangible assets and goodwill resulting from business combinations. December 31,(in millions of dollars)2012 2011ACCO Brands North America (c)$1,398.6 $433.4ACCO Brands International (c)814.3 372.2Computer Products Group (c)104.8 100.4 Total segment assets2,317.7 906.0Unallocated assets188.6 203.5Corporate (c)1.4 7.2Total assets$2,507.7 $1,116.7 (c)Represents total assets, excluding: intercompany balances, cash, deferred taxes, prepaid pension assets, prepaid debt issuance costs and joint venturesaccounted for on an equity basis.Property, plant and equipment, net by geographic region are as follows: December 31,(in millions of dollars)2012 2011U.S.$141.0 $76.2Brazil62.1 —U.K.22.7 23.8Australia17.1 17.5Other countries30.7 29.7Property, plant and equipment$273.6 $147.286Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)Net sales by geographic region for the years ended December 31, 2012, 2011 and 2010 are as follows (d): (in millions of dollars)2012 2011 2010U.S.$959.2 $621.3 $633.0Canada160.8 105.2 97.8Australia133.4 143.0 137.0Brazil118.9 — —UK98.0 115.6 107.3Other countries288.2 333.3 309.5Net sales$1,758.5 $1,318.4 $1,284.6 (d)Net sales are attributed to geographic areas based on the location of the selling company. Major CustomersSales to the Company’s five largest customers totaled $716.2 million, $508.2 million and $496.4 million in the years ended December 31, 2012, 2011and 2010, respectively. Sales to Staples, our largest customer, were $236.3 million (13%), $175.9 million (13%) and $166.8 million (13%) in the yearsended December 31, 2012, 2011 and 2010, respectively. Sales to our second largest customer were $138.9 million (11%) and $141.0 million (11%) in theyears ended December 31, 2011 and 2010, respectively. Sales to no other customer exceeded 10% of annual sales.A significant percentage of our sales are to customers engaged in the office products resale industry. Concentration of credit risk with respect to tradeaccounts receivable is partially mitigated because a large number of geographically diverse customers make up each operating companies’ domestic andinternational customer base, thus spreading the credit risk. At December 31, 2012, and 2011, our top five trade account receivables totaled $184.3 million and$116.0 million, respectively.17. Joint Venture InvestmentsSummarized below is aggregated financial information for the Company’s joint ventures, Pelikan-Artline Pty Ltd and Neschen GBC Graphics Films,LLC ("Neschen"), which are accounted for under the equity method. Accordingly, we record our proportionate share of earnings or losses on the line entitled“Equity in earnings of joint ventures” in the Consolidated Statements of Operations. Our share of the net assets of the joint ventures are included within “Otherassets” in the Condensed Consolidated Balance Sheets. Year Ended December 31,(in millions of dollars)2012 2011 2010Net sales$161.9 $165.6 $151.8Gross profit95.6 94.6 85.8Operating income24.7 24.3 23.0Net income17.4 16.9 16.3 December 31,(in millions of dollars)2012 2011Current assets$80.7 $94.3Non-current assets36.9 37.1Current liabilities34.2 40.0Non-current liabilities12.8 16.7During the fourth quarter of 2012 we recorded an impairment charge of $1.9 million related to our investment in Neschen. We have committed topursue an exit strategy in regards to Neschen, due to significant excess capacity and other opportunities to87Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)reduce the cost of products that we have historically sourced from Neschen. Neschen reported net sales of $8.3 million and net income of $0.1 million for theyear ended December 31, 2012.18. Commitments and ContingenciesPending LitigationIn connection with our May 1, 2012 acquisition of Mead C&OP, we assumed all of the tax liabilities for the acquired foreign operations. In December of2012, the Federal Revenue Department of the Ministry of Finance of Brazil ("FRD") issued a tax assessment against our newly acquired indirect subsidiary,Tilibra Produtos de Papelaria Ltda. ("Tilibra"), which challenged the goodwill recorded in connection with the 2004 acquisition of Tilibra. This assessmentdenied the deductibility of that goodwill from Tilibra's taxable income for the year 2007. The assessment seeks a payment of approximately R$26.9 million($13.2 million based on current exchange rates) of tax, penalties and interest.In January of 2013, Tilibra filed a protest disputing the tax assessment at the first administrative level of appeal within the FRD. We believe that we havemeritorious defenses and intend to vigorously contest this matter, however, there can be no assurances that we will ultimately prevail. We are in the early stagesof the process to challenge the FRD's tax assessment, and the ultimate outcome will not be determined until the Brazilian tax appeal process is complete, whichis expected to take many years. In addition, Tilibra's 2008-2012 tax years remain open and subject to audit, and there can be no assurances that we will notreceive additional tax assessments regarding the goodwill deducted for the Tilibra acquisition for one or more of those years, which could increase theCompany's exposure to a total of approximately $44.5 million (based on current exchange rates), including interest and penalties which have accumulated todate. If the FRD's initial position is ultimately sustained, the amount assessed would adversely affect our reported cash flow in the year of settlement.Because there is no settled legal precedent on which to base a definitive opinion as to whether we will ultimately prevail, the Company considers theoutcome of this dispute to be uncertain. Since it is not more likely than not that we will prevail, in the fourth quarter of 2012, we recorded a reserve in theamount of $44.5 million in consideration of this matter. In addition, the Company will continue to accrue interest related to this matter until such time as theoutcome is known or until evidence is presented that we are more likely than not to prevail.There are various other claims, lawsuits and pending actions against us incidental to our operations. It is the opinion of management that the ultimateresolution of these matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows. However, we canmake no assurances that we will ultimately be successful in our defense of any of these matters. Lease CommitmentsFuture minimum rental payments for all non-cancelable operating leases (reduced by minor amounts from subleases) at December 31, 2012 are asfollows: (in millions of dollars) 2013$21.0201418.3201515.7201613.7201711.8Remainder48.4Total minimum rental payments$128.9Total rental expense reported in our statement of operations for all non-cancelable operating leases (reduced by minor amounts for subleases) amounted to$22.3 million, $21.7 million and $23.2 million for the years ended December 31, 2012, 2011 and 2010, respectively.88Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)Unconditional Purchase CommitmentsFuture minimum payments under unconditional purchase commitments, primarily for inventory purchase commitments at December 31, 2012 are asfollows: (in millions of dollars) 2013$89.420148.120158.120168.120178.0Thereafter— $121.7EnvironmentalWe are subject to laws and regulations relating to the protection of the environment. While it is not possible to quantify with certainty the potential impactof actions regarding environmental matters, particularly remediation and other compliance efforts that our subsidiaries may undertake in the future, in theopinion of management, compliance with the present environmental protection laws, before taking into account any estimated recoveries from third parties,will not have a material adverse effect upon the results of operations, cash flows or financial condition of the Company.19. Discontinued OperationsDuring the second quarter of 2011, we sold GBC Fordigraph to The Neopost Group. The Australia-based business was formerly part of the ACCOBrands International segment and is included in the financial statements as discontinued operations. GBC Fordigraph represented $45.9 million in annual netsales for the year ended December 31, 2010. We received final proceeds of $52.9 million during 2011, inclusive of working capital adjustments and sellingcosts. In connection with this transaction, in 2011, the Company recorded a gain on sale of $41.9 million ($36.8 million after- tax).Also included in discontinued operations are residual costs of our commercial print finishing business, which was sold during the second quarter of2009. During the twelve months ended December 31, 2012, the Company recorded additional costs related to a legal settlement and to ongoing legal disputes of$2.0 million related to its former commercial print finishing business.The operating results and financial position of discontinued operations are as follows: (in millions, except per share data)2012 2011 2010Operating Results: Net sales$— $19.9 $45.9Income from operations before income taxes(1)— 2.5 6.6Gain (loss) on sale before income taxes(2.1) 41.5 (0.1)Provision (benefit) for income taxes(0.5) 5.9 1.9Income (loss) from discontinued operations$(1.6) $38.1 $4.6Per share: Basic income (loss) from discontinued operations$(0.02) $0.69 $0.08Diluted income (loss) from discontinued operations$(0.02) $0.66 $0.08 (1)During the fourth quarter of 2010, we completed the sale of a property formerly occupied by our commercial print finishing business, resulting in again on sale of $1.7 million.Litigation-related accruals of $2.4 million and $1.1 million related to discontinued operations are included in other current liabilities as of December 31,2012 and 2011, respectively. Of the $2.4 million accrued at December 31, 2012, $1.1 million was paid in January of 2013.89Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)20. Quarterly Financial Information (Unaudited)The following is an analysis of certain items in the consolidated statements of operations by quarter for 2012 and 2011: (in millions of dollars, except per share data)1st Quarter 2nd Quarter 3rd Quarter 4th Quarter2012 Net sales$288.9 $438.7 $501.2 $529.7Gross profit79.8 124.3 151.2 178.1Operating income4.0 11.6 56.4 67.3Income (loss) from continuing operations(17.3) 94.2 55.2 (15.1)Loss from discontinued operations, net of income taxes(0.1) — — (1.5)Net income (loss)$(17.4) $94.2 $55.2 $(16.6)Basic income (loss) per share: Income (loss) from continuing operations$(0.31) $1.00 $0.49 $(0.13)Loss from discontinued operations$— $— $— $(0.01)Net income (loss)$(0.31) $1.00 $0.49 $(0.15)Diluted income (loss) per share: Income (loss) from continuing operations$(0.31) $0.98 $0.48 $(0.13)Loss from discontinued operations$— $— $— $(0.01)Net income (loss)$(0.31) $0.98 $0.48 $(0.15)2011 Net sales$298.4 $330.2 $339.1 $350.7Gross profit85.2 101.4 103.2 109.4Operating income13.3 30.6 35.4 35.9Income (loss) from continuing operations(9.0) 6.3 11.9 9.4Income (loss) from discontinued operations, net of income taxes0.9 37.4 (0.2) —Net income (loss)$(8.1) $43.7 $11.7 $9.4Basic income (loss) per share: Income (loss) from continuing operations$(0.16) $0.11 $0.22 $0.17Income (loss) from discontinued operations$0.02 $0.68 $— $—Net income (loss)$(0.15) $0.79 $0.21 $0.17Diluted income (loss) per share: Income (loss) from continuing operations$(0.16) $0.11 $0.21 $0.16Income (loss) from discontinued operations$0.02 $0.64 $— $—Net income (loss)$(0.15) $0.75 $0.20 $0.1690Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENot applicable. ITEM 9A. CONTROLS AND PROCEDURESAs of the end of the period covered by this Annual Report on Form 10-K, we carried out an evaluation, under the supervision and with the participationof our Disclosure Committee and our management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design andoperation of our disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded thatour disclosure controls and procedures were effective.In the second quarter of 2012, we completed the Merger of Mead C&OP which represented $551.5 million of our consolidated net sales for the yearended December 31, 2012. Consolidated assets as of December 31, 2012 were $514.4 million. As the acquisition occurred in the second quarter of 2012, thescope of our assessment of the effectiveness of internal control over financial reporting does not include Mead C&OP. This exclusion is in accordance with theSEC's general guidance that an assessment of a recently acquired business may be omitted from our scope in the year of acquisition.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 Registered PublicAccounting 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 INFORMATIONNot applicable.PART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEInformation required under this Item is contained in Item 1, Business - Executive Officers of the Company, of this report and in the Company’s 2013Definitive Proxy Statement, which is to be filed with the Securities and Exchange Commission prior to April 30, 2013 and is incorporated herein by reference.Code of Business ConductThe Company has adopted a code of business conduct as required by the listing standards of the New York Stock Exchange and rules of the Securitiesand Exchange Commission. This code applies to all of the Company’s directors, officers and employees. The code of business conduct is published andavailable at the Investor Relations Section of the Company’s internet website at www.accobrands.com. The Company will post on its website any amendmentsto, or waivers from, our code of business conduct applicable to any of its directors or executive officers. The foregoing information will be available in print toany shareholder who requests such information from ACCO Brands Corporation, 300 Tower Parkway, Lincolnshire, IL 60069, Attn: Office of the GeneralCounsel. After April 16, 2013 please send all inquiries to ACCO Brands Corporation, Four Corporate Drive, Lake Zurich, IL 60047-2997, Attn: Office ofthe General Counsel.As required by Section 303A.12(a) of the New York Stock Exchange Listed Company Manual, the Company’s Chief Executive Officer certified to theNYSE within 30 days after the Company’s 2012 Annual Meeting of Stockholders that he was not aware of any violation by the Company of the NYSECorporate Governance Listing Standards.ITEM 11. EXECUTIVE COMPENSATIONInformation required under this Item is contained in the Company’s 2013 Definitive Proxy Statement, which is to be filed with the Securities andExchange Commission prior to April 30, 2013 and is incorporated herein by reference.91Table of ContentsITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERSEquity Compensation Plan InformationThe following table gives information, as of December 31, 2012, about our common stock that may be issued upon the exercise of options, stock-settledappreciation rights (“SSARs”) and other equity awards under all compensation plans under which equity securities are reserved for issuance. Plan categoryNumber ofsecurities to beissued uponexercise ofoutstandingoptions, warrantsand rights(a) Weighted-averageexercise price ofoutstandingoptions, warrantsand rights(b) Number of securitiesremaining available forfuture issuance underequity compensationplans (excludingsecurities reflected incolumn (a))(c) Equity compensation plans approved by security holders(1)4,878,553 $10.12 11,295,208(2) Equity compensation plans not approved by security holders— — — Total4,878,553 $10.12 11,295,208(2) (1)This number includes 3,385,219 common shares that were subject to issuance upon the exercise of stock options/SSARs granted under the 2011Amended and Restated ACCO Brands Corporation Incentive Plan (the “Restated Plan”), and 1,493,334 common shares that were subject to issuanceupon the exercise of stock options/SSARs pursuant to the Company’s 2005 Assumed Option and Restricted Stock Unit Plan. The weighted-averageexercise price in column (b) of the table reflects all such options/SSARs.(2)These are shares available for grant as of December 31, 2012 under the Restated Plan pursuant to which the Compensation Committee of the Board ofDirectors may make various stock-based awards including grants of stock options, stock-settled appreciation rights, restricted stock, restricted stockunits and performance share units. In addition to these shares, the following shares may become available for grant under the Restated Plan and, to theextent such shares have become available as of December 31, 2012, they are included in the table as available for grant: shares covered by outstandingawards under the Plan that were forfeited or otherwise terminated.Other information required under this Item is contained in the Company’s 2013 Definitive Proxy Statement, which is to be filed with the Securities andExchange Commission prior to April 30, 2013, and is incorporated herein by reference.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEInformation required under this Item is contained in the Company’s 2013 Definitive Proxy Statement, which is to be filed with the Securities andExchange Commission prior to April 30, 2013 and is incorporated herein by reference.ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESInformation required under this Item is contained in the Company’s 2013 Definitive Proxy Statement, which is to be filed with the Securities andExchange Commission prior to April 30, 2013 and is incorporated herein by reference.92Table of ContentsPART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESThe 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 as to whichthe total amount of securities authorized thereunder does not exceed 10 percent of our total assets on a consolidated basis. (a)Financial Statements, Financial Statement Schedules and Exhibits1.All Financial StatementsThe following consolidated financial statements of the Company and its subsidiaries are filed as part of this report under Item 8 - Financial Statementsand Supplementary Data: PageReports of Independent Registered Public Accounting Firm47Management’s Report on Internal Control Over Financial Reporting48Consolidated Balance Sheets as of December 31, 2012 and 201149Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 201050Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2012, 2011 and 201051Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 201052Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2012, 2011 and 201053Notes to Consolidated Financial Statements542.Financial Statement Schedule:Schedule II - Valuation and Qualifying Accounts and Reserves, for each of the years ended December 31, 2012, 2011 and 2010.The separate consolidated financial statements of Pelikan-Artline Pty Ltd, the Company’s 50 percent owned joint venture as of September 30, 2012 and2011 and for each of the years in the three-year period ended September 30, 2012 required to be included in this report pursuant to Rule 3-09 of Regulation S-X, are filed as Exhibit 99.1.3.Exhibits:A list of exhibits filed or furnished with this Report on Form 10-K (or incorporated by reference to exhibits previously filed or furnished by theCompany) is provided in the accompanying Exhibit Index.93Table of ContentsEXHIBIT INDEXNumber Description of Exhibit2.1Agreement and Plan of Merger, dated November 17, 2011, by and among MeadWestvaco Corporation, Monaco SpinCo Inc., ACCOBrands Corporation and Augusta Sub, Inc. (incorporated by reference to Exhibit 2.1 to Form 8-K filed by the Registrant on November 22,2011 (File No. 001-08454))2.2Amendment No. 1, dated as of March 19, 2012, to the Agreement and Plan of Merger, dated as of November 17, 2011, by and amongMeadWestvaco Corporation, Monaco SpinCo Inc., ACCO Brands Corporation and Augusta Acquisition Sub, Inc. (incorporated byreference to Exhibit 2.1 to Form 8-K filed by the Registrant on March 22, 2012 (File No. 001-08454))2.3Share Sale Agreement dated May 25, 2011 entered into by and between GBC Australia Pty Ltd, ACCO Brands Corporation, NeopostHolding Pty Ltd and NEOPOST S.A. (incorporated by reference to Exhibit 2.1 to Form 10-Q filed by the Registrant on July 27, 2011 (FileNo. 001-08454))3.1Restated Certificate of Incorporation of ACCO Brands Corporation, as amended (incorporated by reference to Exhibit 3.1 to Form 8-K filedby the Registrant on May 19, 2008 (File No. 001-08454))3.2Certificate of Designation of Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.2 to the Registrant’sCurrent Report on Form 8-K filed August 17, 2005)3.3By-laws of ACCO Brands Corporation, as amended through February 20, 2013 (incorporated by reference to Exhibit 3.1 to the Registrant’sCurrent Report on Form 8-K filed February 26, 2013)4.1Rights Agreement, dated as of August 16, 2005, between ACCO Brands Corporation and Wells Fargo Bank, National Association, asrights agent (incorporated by reference to Exhibit 4.1 to Form 8-K filed by the Registrant on August 17, 2005 (File No. 001-08454))4.2Indenture, dated as of April 30, 2012, among Monaco SpinCo Inc., as issuer, the guarantors named therein, and Wells Fargo Bank,National Association, as trustee (incorporated by reference to Exhibit 10.3 of the Registrant's Form 8-K filed on May 7, 2012 (File No. 001-08454))4.3First Supplemental Indenture, dated as of May 1, 2012, among the Company, Monaco SpinCo Inc., the guarantors named therein andWells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 10.4 of the Registrant's Form 8-K filed on May 7,2012 (File No. 001-08454))4.4Second Supplemental Indenture, dated as of May 1, 2012, among the Company, Mead Products LLC, the guarantors named therein andWells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 10.5 of the Registrant's Form 8-K filed on May 7,2012 (File No. 001-08454))4.5Registration Rights Agreement, dated as of May 1, 2012, among Monaco SpinCo Inc., the Company, the guarantors named therein, andrepresentatives of the initial purchasers named therein (incorporated by reference to Exhibit 10.6 of the Registrant's Form 8-K filed on May7, 2012 (File No. 001-08454))10.1ACCO Brands Corporation 2005 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report onForm 8-K dated August 3, 2005 and filed August 8, 2005 (File No. 001-08454))10.2ACCO Brands Corporation 2005 Assumed Option and Restricted Stock Unit Plan, together with Sub-Plan A thereto (incorporated byreference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated August 3,2005 and filed August 8, 2005 (File No. 001-08454))10.3ACCO Brands Corporation Annual Executive Incentive Compensation Plan (incorporated by reference to Exhibit 10.3 to the Registrant’sCurrent Report on Form 8-K dated August 3, 2005 and filed August 8, 2005 (File No. 001-08454))10.4Tax Allocation Agreement, dated as of August 16, 2005, between ACCO World Corporation and Fortune Brands, Inc. (incorporated byreference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated August 12, 2005 and filed August 17, 2005 (File No. 001-08454))94Table of ContentsNumber Description of Exhibit10.5Tax Allocation Agreement, dated as of August 16, 2005, between General Binding Corporation and Lane Industries, Inc. (incorporated byreference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated August 12, 2005 and filed August 17, 2005 (File No. 001-08454))10.6Employee Matters Agreement, dated as of March 15, 2005, by and among Fortune Brands, Inc., ACCO World Corporation and GeneralBinding Corporation (incorporated by reference to Exhibit 10.2 to the Registrant’s Registration Statement on Form S-4 (File No. 333-124946))10.7Executive Severance/Change in Control Agreement, dated as of August 26, 2000, by and between Steven Rubin and GBC (incorporated byreference to Exhibit 10.15 to General Binding Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 (FileNo. 001-08454))10.8Letter Agreement, dated as of September 5, 2003, between ACCO World Corporation and Neal Fenwick (incorporated by reference toExhibit 10.6 to the Registrant’s Registration Statement on Form S-4 (File No. 333-124946))10.9Letter Agreement, dated November 8, 2000, as revised in January 2001, between ACCO World Corporation and Neal Fenwick(incorporated by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form S-4 (File No. 333-124946))10.10Letter Agreement, dated September 8, 1999, between ACCO World Corporation and Neal Fenwick (incorporated by reference toExhibit 10.8 to the Registrant’s Registration Statement on Form S-4 (File No. 333-124946))10.11Amended and Restated ACCO Brands Corporation 2005 Incentive Plan (incorporated by reference to Annex A of the Registrant’s definitiveproxy statement filed April 4, 2006 (File No. 001-08454))10.12Amendment to the Amended and Restated ACCO Brands Corporation 2005 Incentive Plan (incorporated by reference to Exhibit 10.1 toForm 8-K filed by the Registrant on May 19, 2008 (File No. 001-08454))10.13ACCO Brands Corporation Executive Severance Plan (effective December 1, 2007) (incorporated by reference to Exhibit 10.1 to Form 8-Kfiled by the Registrant on November 29, 2007 (File No. 001-08454))10.142008 Amended and Restated ACCO Brands Corporation Supplemental Retirement Plan (incorporated by reference to Exhibit 10.31 to Form10-K filed by the Registrant on February 29, 2008 (File No. 001-08454))10.15Amendment to the 2008 Amended and Restated ACCO Brands Corporation Supplemental Retirement Plan (incorporated by reference toExhibit 10.1 to Form 8-K filed by the Registrant on January 22, 2009 (File No. 001-08454))10.16Retirement Agreement for David D. Campbell effective as of May 1, 2008 (incorporated by reference to Exhibit 10.3 to Form 10-Q filed bythe Registrant on May 7, 2008 (File No. 001-08454))10.17Retirement Agreement for Neal V. Fenwick effective as of May 1, 2008 (incorporated by reference to Exhibit 10.4 to Form 10-Q filed by theRegistrant on May 7, 2008 (File No. 001-08454))10.18Letter Agreement dated November 4, 2008, between ACCO Brands Corporation and Robert J. Keller (incorporated by reference to Exhibit10.1 to Form 8-K filed by the Registrant on November 5, 2008 (File No. 001-08454))10.19Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to Form 8-K filed by the Registrant on December 24, 2008(File No. 001-08454))10.20Form of Stock-settled Stock Appreciation Rights Agreement under the ACCO Brands Corporation Amended and Restated 2005 Long-TermIncentive Plan, as amended (incorporated by reference to Exhibit 10.46 to Form 10-K filed by the Registrant on March 2, 2009 (File No.001-08454))95Table of ContentsNumber Description of Exhibit10.21Letter agreement, dated October 11, 2007, from ACCO Brands Corporation to David A. Kaput (incorporated by reference to Exhibit 10.1 toForm 8-K filed by the Registrant on March 3, 2009 (File No. 001-08454))10.22Amended and Restated ACCO Brands Deferred Compensation Plan for Non-Employee Directors, effective December 14, 2009(incorporated by reference to Exhibit 10.41 to Form 10-K filed by the Registrant on February 26, 2010 (File No. 001-089454))10.23Letter agreement, dated November 4, 2008, from ACCO Brands Corporation to Christopher M. Franey (incorporated by reference to Exhibit10.42 to Form 10-K filed by the Registrant on February 26, 2010 (File No. 001-08454))10.24Letter agreement, dated March 6, 2009, from ACCO Brands Corporation to Thomas H. Shortt (incorporated by reference to Exhibit 10.43to Form 10-K filed by the Registrant on February 26, 2010 (File No. 001-08454))10.25Form of 2010-2012 Cash Based Award Agreement under the ACCO Brands Corporation Amended and Restated 2005 Incentive Plan(incorporated by reference to Exhibit 10.1 to Form 10-Q filed by the Registrant on May 7, 2010 (File No. 001-08454)) 10.26Form of 2010-2012 Performance Stock Unit Award Agreement under the ACCO Brands Corporation Amended and Restated Incentive Plan(incorporated by reference to Exhibit 10.2 to Form 10-Q filed by the Registrant on May 7, 2010 (File No. 001-08454))10.27Description of certain compensation arrangements with respect to the Registrant's named executive officers (incorporated by reference toItem 5.02 of Registrant's Form 8-K filed on March 1, 2010 (File No. 001-08454))10.28Description of changes to compensation arrangements for Christopher M. Franey (incorporated by reference to Item 5.02 of Registrant'sForm 8-K filed on September 21, 2010 (File No. 001-08454))10.29Description of changes to compensation arrangements for Boris Elisman (incorporated by reference to Item 5.02 of Registrant's Form 8-Kfiled on December 14, 2010 (File No. 001-08454))10.30Amended and Restated 2005 Incentive Plan Restricted Stock Unit Award Agreement, effective as of February 24, 2011 between Robert J.Keller and ACCO Brands Corporation (incorporated by reference to Exhibit 10.1 to Form 8-K filed by the Registrant on February 15, 2011(File No. 001-08454))10.312011 Amended and Restated ACCO Brands Corporation Incentive Plan (incorporated by reference to Exhibit 10.1 to ACCO BrandsCorporation's Current Report on Form 8-K filed with the SEC on May 20, 2011 (File No. 001-08454))10.32Form of Directors Restricted Stock Unit Award Agreement under the 2011 Amended and Restated ACCO Brands Corporation IncentivePlan (incorporated by reference to Exhibit 10.2 to ACCO Brands Corporation's Current Report on Form 8-K filed with the SEC on May 20,2011 (File No. 001-08454))10.33Form of Nonqualified Stock Option Agreement under the 2011 Amended and Restated ACCO Brands Corporation Incentive Plan(incorporated by reference to Exhibit 10.3 to ACCO Brands Corporation's Current Report on Form 8-K filed with the SEC on May 20,2011 (File No. 001-08454))10.34Form of Restricted Stock Unit Award Agreement under the 2011 Amended and Restated ACCO Brands Corporation Incentive Plan(incorporated by reference to Exhibit 10.4 to ACCO Brands Corporation's Current Report on Form 8-K filed with the SEC on May 20,2011 (File No. 001-08454))10.35Form of Performance Stock Unit Award Agreement under the 2011 Amended and Restated ACCO Brands Corporation Incentive Plan(incorporated by reference to Exhibit 10.5 to ACCO Brands Corporation's Current Report on Form 8-K filed with the SEC on May 20,2011 (File No. 001-08454))96Table of ContentsNumber Description of Exhibit10.36Form of Stock-Settled Stock Appreciation Rights Award Agreement under the 2011 Amended and Restated ACCO Brands CorporationIncentive Plan (incorporated by reference to Exhibit 10.6 to ACCO Brands Corporation's Current Report on Form 8-K filed with the SECon May 20, 2011 (File No. 001-08454))10.37Separation Agreement, dated November 17, 2011, by and between MeadWestvaco and Monaco SpinCo Inc. (incorporated by reference toExhibit 10.1 of Registrant's Form 8-K filed on November 22, 2011 (File No. 001-08454))10.38Employee Benefits Agreement, dated as of November 17, 2011, by and among MeadWestvaco Corporation, Monaco Spinco Inc. andACCO Brands Corporation. (incorporated by reference to Exhibit 10.3 of Registrant's Form S-4/A filed on February 13, 2012 (File No. 333-178869))10.39Amendment to the February 24, 2011 Amended and Restated 2005 Restricted Stock Unit Award Agreement, made and entered into as ofDecember 7, 2011, between Robert J. Keller and ACCO Brands Corporation (incorporated by reference to Exhibit 10.1 of Registrant's Form8-K filed on December 12, 2011 (File No. 001-08454))10.40Amendment No. 1, dated as of March 19, 2012, to the Separation Agreement, dated as of November 17, 2011, by and amongMeadWestvaco Corporation and Monaco SpinCo Inc. (incorporated by reference to Exhibit 10.1 to Form 8-K filed by the Registrant onMarch 22, 2012 (File No. 001-08454))10.41Credit Agreement, dated as of March 26, 2012, among ACCO Brands Corporation, certain direct and indirect subsidiaries of ACCOBrands Corporation, Barclays Bank PLC and Bank of Montreal, as administrative agents, and the other agents and lenders named therein(incorporated by reference to Exhibit 10.1 to Form 8-K filed by the Registrant on March 30, 2012 (File No. 001-08454))10.42Amendment of 2011 Amended and Restated ACCO Brands Corporation Incentive Plan (incorporated by reference to Exhibit 10.1 of theRegistrant's Form 8-K filed on April 24, 2012 (File No. 001-08454))10.43Transition Services Agreement, effective as of May 1, 2012, between Monaco SpinCo Inc. and MeadWestvaco Corporation (incorporatedby reference to Exhibit 10.1 of the Registrant's Form 8-K filed on May 7, 2012 (File No. 001-08454))10.44Tax Matters Agreement, effective as of May 1, 2012, among the Company, MeadWestvaco Corporation and Monaco SpinCo Inc.(incorporated by reference to Exhibit 10.2 of the Registrant's Form 8-K filed on May 7, 2012 (File No. 001-08454))10.45Amendment to the 2008 Amended and Restated ACCO Brands Corporation Supplemental Retirement Plan (incorporated by reference toExhibit 10.8 of the Registrant's Form 8-K filed on May 7, 2012 (File No. 001-08454))10.46Amendment of the ACCO Brands Corporation Executive Severance Plan, adopted as of October 23, 2012 (incorporated by reference toExhibit 10.1 to Form 10-Q filed by the Registrant on October 31, 2012 (File No. 001-08454))21.1Subsidiaries of the Registrant*23.1Consent of KPMG LLP*23.2Consent of BDO*24.1Power of attorney*31.1Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*31.2Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*97Table of ContentsNumber Description of Exhibit32.1Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*32.2Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*99.1Pelikan-Artline Pty Ltd Audited Financial Statements as of September 30, 2012*101The following financial statements from the Company's Annual Report on Form 10-K for the year ended December 31, 2012 formatted inXBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets as of December 31, 2012 and 2011, (ii) theConsolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010, (iii) the Consolidated Statements ofComprehensive Income (Loss) for the years ended December 31, 2012, 2011 and 2010, (iv) the Consolidated Statements of Cash Flows forthe years ended December 31, 2012, 2011 and 2010, (v) Consolidated Statements of Stockholders Equity (Deficit) for the years endedDecember 31, 2012, 2011 and 2010, and (vi) related notes to those financial statements+*Filed herewith.+In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 shall not be deemed to be “filed” forpurposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, or otherwise subject toliability under those sections, and shall not be part of any registration statement or other document filed under the Securities Act or theExchange Act, except as shall be expressly set forth by specific reference in such filing.98Table of ContentsSIGNATURESPursuant 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 signed on itsbehalf by the undersigned thereunto duly authorized. REGISTRANT: ACCO BRANDS CORPORATION By:/s/ Robert J. Keller Robert J. Keller Chairman of the Board and Chief ExecutiveOfficer (principal executive officer) By:/s/ Neal V. Fenwick Neal V. Fenwick Executive Vice President and Chief FinancialOfficer (principal financial officer) By:/s/ Thomas P. O’Neill, Jr. Thomas P. O’Neill, Jr. Senior Vice President, Finance and Accounting (principal accountingofficer)February 28, 2013Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on its behalf by the following persons on behalf of theRegistrant and in the capacities and on the dates indicated. Signature Title Date /s/ Robert J. Keller Chairman of the Board andChief Executive Officer(principal executive officer) February 28, 2013Robert J. Keller /s/ Neal V. Fenwick Executive Vice President andChief Financial Officer(principal financial officer) February 28, 2013Neal V. Fenwick /s/ Thomas P. O’Neill, Jr. Senior Vice President, Finance andAccounting (principal accountingofficer) February 28, 2013Thomas P. O’Neill, Jr. /s/ James A. Buzzard* Director February 28, 2013James A. Buzzard /s/ Kathleen S. Dvorak* Director February 28, 2013Kathleen S. Dvorak /s/ G. Thomas Hargrove* Director February 28, 2013G. Thomas Hargrove 99Table of ContentsSignature Title Date /s/ Robert H. Jenkins* Director February 28, 2013Robert H. Jenkins /s/ Thomas Kroeger* Director February 28, 2013Thomas Kroeger /s/ Michael Norkus* Director February 28, 2013Michael Norkus /s/ Sheila G. Talton* Director February 28, 2013Sheila G. Talton /s/ Norman H. Wesley* Director February 28, 2013Norman H. Wesley /s/ Neal V. Fenwick * Neal V. Fenwick asAttorney-in-Fact 100Table of ContentsACCO Brands CorporationVALUATION AND QUALIFYING ACCOUNTS AND RESERVESSCHEDULE IIAllowances for Doubtful AccountsChanges in the allowances for doubtful accounts were as follows: Year Ended December 31,(in millions of dollars)2012 2011 2010Balance at beginning of year$5.1 $5.2 $6.9Additions charged to expense2.2 1.4 3.3Deductions—write offs(3.0) (1.3) (5.3)Mead C&OP acquisition2.1 — —Foreign exchange changes0.1 (0.2) 0.3Balance at end of year$6.5 $5.1 $5.2Allowances for Sales Returns and DiscountsChanges in the allowances for sales returns and discounts were as follows: Year Ended December 31,(in millions of dollars)2012 2011 2010Balance at beginning of year$7.7 $9.2 $9.8Additions charged to expense41.0 41.6 31.8Deductions—returns(41.6) (43.1) (32.1)Mead C&OP acquisition2.8 — —Foreign exchange changes0.7 — (0.3)Balance at end of year$10.6 $7.7 $9.2Allowances for Cash DiscountsChanges in the allowances for cash discounts were as follows: Year Ended December 31,(in millions of dollars)2012 2011 2010Balance at beginning of year$1.1 $1.2 $1.2Additions charged to expense16.4 11.0 11.3Deductions—discounts taken(16.0) (11.0) (11.1)Mead C&OP acquisition0.6 — —Foreign exchange changes0.1 (0.1) (0.2)Balance at end of year$2.2 $1.1 $1.2101Table of ContentsACCO Brands CorporationVALUATION AND QUALIFYING ACCOUNTS AND RESERVESSCHEDULE II (Continued)Warranty ReservesChanges in the reserve for warranty claims were as follows: Year Ended December 31,(in millions of dollars)2012 2011 2010Balance at beginning of year$2.7 $3.1 $2.8Provision for warranties issued3.3 3.0 3.2Settlements made (in cash or in kind)(3.2) (3.4) (2.9)Balance at end of year$2.8 $2.7 $3.1Income Tax Valuation AllowanceChanges in the deferred tax valuation allowances were as follows: Year Ended December 31,(in millions of dollars)2012 2011 2010Balance at beginning of year$204.3 $193.2 $188.9Charges/(credits) to expense(145.1) 5.4 15.7Charged to other accounts(4.3) 7.0 (7.6)Foreign exchange changes0.5 (1.3) (3.8)Balance at end of year$55.4 $204.3 $193.2See accompanying report of independent registered public accounting firm.102Exhibit 21.1SUBSIDIARIESACCO Brands Corporation, a Delaware corporation, had the domestic and international subsidiaries shown below as of December 31, 2012. Certain domesticand international subsidiaries are not named because they were not significant in the aggregate. ACCO Brands Corporation has no parent. Name of SubsidiaryJurisdiction of Organization U.S. Subsidiaries: ACCO Brands International, Inc.DelawareACCO Brands USA LLCDelawareACCO Europe Finance Holdings, LLCDelawareACCO Europe International Holdings, LLCDelawareACCO International Holdings, Inc.DelawareDay-Timers, Inc.DelawareGeneral Binding LLCDelawareMead Products LLCDelawareGBC International, Inc.Nevada International Subsidiaries: ACCO Australia Pty. Ltd.AustraliaACCO Brands Australia Holding Pty. Ltd.AustraliaACCO Brands Australia Pty. Ltd.AustraliaTilibra Produtos de Papelaria LtdaBrazilACCO Brands C&OP Inc.CanadaACCO Brands Canada Inc.CanadaACCO Brands Canada LPCanadaACCO Brands CDA Ltd.CanadaACCO Brands Europe Holding LPEnglandACCO Brands Europe Ltd.EnglandACCO Europe Finance LPEnglandACCO Europe Ltd.EnglandACCO-Rexel Group Services LimitedEnglandACCO Deutschland Beteiligungsgesellschaft mbhGermanyACCO-Rexel LimitedIrelandACCO Brands Italia S.r.L.ItalyACCO Brands Japan K.K.JapanACCO Mexicana S.A. de C.V.MexicoACCO Brands Benelux B.V.NetherlandsACCO Nederland Holding B.V.NetherlandsGBC Europe ABSwedenEXHIBIT 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-127626, 333-127631, 333-127750, 333-136662, 333‑153157, 333-157726, 333-176247, and 333-181430) of ACCO Brands Corporation of our report dated February 28, 2013,with respect to the consolidated balance sheets of ACCO Brands Corporation and subsidiaries as of December 31, 2012 and 2011, and the relatedconsolidated statements of operations, comprehensive income (loss), cash flows, and stockholders’ equity (deficit), for each of the years in thethree-year period ended December 31, 2012, the related financial statement schedule, and the effectiveness of internal control over financialreporting, which report is included in the December 31, 2012 annual report on Form 10-K of ACCO Brands Corporation.Our report dated February 28, 2013 on internal control over financial reporting as of December 31, 2012, contains an explanatory paragraph thatstates management excluded from its assessment of the effectiveness of internal control over financial reporting as of December 31, 2012, the MeadConsumer and Office Products Business (“Mead C&OP Business”) internal control over financial reporting associated with total assets of $514.4million and total revenues of $551.5 million included in the consolidated financial statements of ACCO Brands Corporation and subsidiaries as ofand for the year ended December 31, 2012. Our audit of internal control over financial reporting of the Company also excluded an evaluation of theinternal control over the financial reporting of the Mead C&OP Business./s/ KPMG LLPChicago, IllinoisFebruary 28, 2013EXHIBIT 23.2CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the inclusion of our audit report dated December 19, 2012 relating to our audit of the Financial Statements of Pelikan Artline JointVenture for the year ended September 30, 2012, which is included in this Form 10-K of ACCO Brands Corporation./s/ BDOBDO East Coast PartnershipSydney, AustraliaFebruary 22, 2013Exhibit 24.1LIMITED POWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Robert J.Keller, Neal V. Fenwick, and Thomas P. O’Neill, Jr. and each of them, as his or her 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, 2012 (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 or her capacity as a director orofficer of the registrant, to the Annual Report as filed with the United States Securities and Exchange Commission, to any and all amendments thereto, and toany and 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.Signature Title Date /s/ Robert J. Keller Chairman of the Board andChief Executive Officer(principal executive officer) February 22, 2013Robert J. Keller /s/ Neal V. Fenwick Executive Vice President andChief Financial Officer(principal financial officer) February 22, 2013Neal V. Fenwick /s/ Thomas P. O’Neill, Jr. Senior Vice President, Financeand Accounting (principalaccounting officer) February 22, 2013Thomas P. O’Neill, Jr. /s/ James A. Buzzard Director February 22, 2013James A. Buzzard /s/ Kathleen S. Dvorak Director February 22, 2013Kathleen S. Dvorak /s/ G. Thomas Hargrove Director February 22, 2013G. Thomas Hargrove /s/ Robert H. Jenkins Director February 22, 2013Robert H. Jenkins /s/ Thomas Kroeger Director February 22, 2013Thomas Kroeger /s/ Michael Norkus Director February 22, 2013Michael Norkus /s/ Sheila G. Talton Director February 22, 2013Sheila G. Talton /s/ Norman H. Wesley Director February 22, 2013Norman H. Wesley Exhibit 31.1CERTIFICATIONSI, Robert J. Keller, 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) and 15d-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; andd)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 fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’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; andb)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/ Robert J. Keller Robert J. Keller Chairman of the Board and Chief Executive OfficerDate: February 28, 2013Exhibit 31.2CERTIFICATIONSI, 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) and 15d-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; andd)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 fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’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; andb)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. Fenwick Executive Vice President and Chief Financial OfficerDate: February 28, 2013Exhibit 32.1CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,As adopted pursuant toSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of ACCO Brands Corporation on Form 10-K for the period ended December 31, 2012 as filed with the Securitiesand Exchange Commission on the date hereof, (the “Report”), I, Robert J. Keller, Chief Executive Officer of ACCO Brands Corporation, 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) or 15(d) 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/ Robert J. Keller Robert J. Keller Chairman of the Board and Chief ExecutiveOfficerFebruary 28, 2013Exhibit 32.2CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,As adopted pursuant toSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of ACCO Brands Corporation on Form 10-K for the period ended December 31, 2012 as filed with the Securitiesand Exchange Commission on the date hereof, (the “Report”), I, Neal V. Fenwick, Chief Executive Officer of ACCO Brands Corporation, 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) or 15(d) 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. Fenwick Executive Vice President andChief Financial OfficerFebruary 28, 2013Exhibit 99.1Financial Statements of Pelikan Artline Joint Venture and Controlled EntitiesThe accompanying consolidated financial statements of Pelikan Artline Joint Venture and Controlled Entities, a 50% owned joint venture investment of ACCOBrands Corporation ("ACCO"), are being provided pursuant to Rule 3-09 of the Securities and Exchange Commission's ("SEC") Regulation S-X. Thesefinancial statements are audited as of September 30, 2012 and are prepared in accordance with accounting principles generally accepted rules in Australia andas permitted by the SEC Regulations.PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesA.B.N. 51 084 958 556FINANCIAL REPORT - 30 SEPTEMBER 2012CONTENTS Independent Auditor's Report1 Directors' Declaration2 Statement of Comprehensive Income3 Statement of Financial Position4 Statement of Changes in Equity5 Statement of Cash Flows6 Notes to the Financial Statements7 Independent Auditors' ReportTo the members of Pelikan Artline Joint VentureWe have audited the accompanying consolidated statements of financial position of Pelikan Artline Joint Venture and controlled entities as of September 30,2012 and 2011 and the related consolidated statements of comprehensive income, statements of changes in equity and statement of cash flows for the yearsthen ended. We have also audited the statements of Pelikan Artline Joint Venture, Parent entity only, as of September 30, 2012 and 2011, and the relatedstatements of comprehensive income, statements of changes in equity and statements of cash flows for the years then ended.We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration ofinternal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the Joint Venture's internal control over financial reporting. According, we express no such opinion. An audit alsoincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide areasonable basis for our opinion.In our opinion, the consolidated financial statements of Pelikan Artline Joint Venture and controlled entities and the financial statements of Pelikan Artline JointVenture, Parent entity only, referred to above present fairly, in all material respects, the financial position of Pelikan Artline Joint Venture and controlled entitiesand the financial position of Pelikan Artline Joint Venture, Parent entity only, at September 30, 2012 and 2011, and the results of those entities' operations andits cash flows for the years then ended in conformity with the accounting principles generally accepted in Australia on the basis as described in note1./s/ BDOBDO East Coast Partnership (formerly PKF East Coast Practice)Sydney, AustraliaDecember 19, 20121PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesFINANCIAL REPORT - 30 SEPTEMBER 2012DIRECTORS' DECLARATIONThe directors of Pelikan Artline Pty Limited, the agent for the joint venture, declare that:1.The financial statements, which comprise the statement of comprehensive income, statement of financial position, statement of changes in equity,statement of cash flows and notes to the financial statements:a)comply with Australian Accounting Standards; andb)give a true and fair view of the financial position as at 30 September 2012 and of the performance for the year ended on that date of the jointventure and consolidated entity.2.In the directors' opinion there are reasonable grounds to believe that the joint venture will be able to pay its debts as and when they become due andpayable.This declaration is made in accordance with a resolution of the board of directors and is signed for and on behalf of the directors by: /s/ A.G. KaldorA.G. KaldorDirector /s/ B.R. HaynesB.R. HaynesDirector Sydney, 19 December 20122PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesSTATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 30 SEPTEMBER 2012 Consolidated Parent 2012 2011 2012 2011 Note$ $ $ $Revenue2124,828,860 127,910,566 133,983,288 131,452,716 124,828,860 127,910,566 133,983,288 131,452,716 Expenses Purchases, distribution & selling (75,069,342) (77,792,675) (75,069,342) (77,792,675)Marketing (14,376,829) (14,302,797) (14,376,829) (14,302,797)Administration, IT & other expenses (10,130,573) (10,791,025) (24,463,587) (24,698,291)Finance costs (1,151,633) (1,465,995) (3,652,813) (3,089,588) (100,728,377) (104,352,492) (117,562,571) (119,883,351) Profit before income tax expense 24,100,483 23,558,074 16,420,717 11,569,365 Income tax expense1,5(4,964,522) (4,800,914) — — Profit after income tax expense for the yearattributable to the owners of the Pelikan Artline JointVenture 19,135,961 18,757,160 16,420,717 11,569,365 Other Comprehensive Income Available for sale financial assets 17,914 60,205 — — Other comprehensive income for the year, net of tax 17,914 60,205 — — Comprehensive income for the year attributable to theowners of the Pelikan Artline Joint Venture 19,153,875 18,817,365 16,420,717 11,569,365 Profit after income tax expense attributable to: Owners of the parent entity 17,103,612 16,791,642 16,420,717 11,569,365 Minority interest 2,032,349 1,965,518 — — 19,135,961 18,757,160 16,420,717 11,569,365 Total comprehensive income attributable to: Owners of the parent entity 17,117,974 16,839,910 16,420,717 11,569,365 Minority interest 2,035,901 1,977,455 — — 19,153,875 18,817,365 16,420,717 11,569,365The above statement of comprehensive income should be read in conjunction with the accompanying notes3PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesSTATEMENT OF FINANCIAL POSITIONAS AT 30 SEPTEMBER 2012 Consolidated Parent 2012 2011 2012 2011 Note$ $ $ $ASSETS Current Assets Cash and cash equivalents616,628,595 26,162,953 2,893,698 3,119,293 Trade and other receivables734,974,822 36,779,458 34,849,424 36,331,187 Inventories819,753,344 22,499,902 19,753,344 22,499,902 Prepayments 902,198 922,226 833,018 843,002 Total current assets 72,258,959 86,364,539 58,329,484 62,793,384 Non-Current Assets Receivables9— — 11,539,398 10,701,395 Financial assets10520,844 495,252 40,853,792 40,853,792 Property, plant and equipment111,294,330 1,606,649 1,055,576 1,149,926 Deferred tax assets12645,019 683,237 — — Intangible assets1330,569,955 30,469,175 50,795 50,015 Total non-current assets 33,030,148 33,254,313 53,499,561 52,755,128 Total assets 105,289,107 119,618,852 111,829,045 115,548,512 LIABILITIES Current Liabilities Trade and other payables1423,266,206 27,781,809 32,166,345 34,176,061 Provisions151,675,543 1,644,271 1,009,524 966,271 Short-term borrowings164,000,000 4,000,000 4,000,000 4,000,000 Current tax liabilities 2,541,554 2,622,300 — — Total current liabilities 31,483,303 36,048,380 37,175,869 39,142,332 Non-Current Liabilities Trade and other payables17— — 39,964,138 31,541,045 Long-term borrowings1810,000,000 14,000,000 10,000,000 14,000,000 Deferred tax liabilities19122,711 233,199 — — Provisions20267,844 241,307 69,863 54,307 Total non-current liabilities 10,390,555 14,474,506 50,034,001 45,595,352 Total liabilities 41,873,858 50,522,886 87,209,870 84,737,684 Net assets 63,415,249 69,095,966 24,619,175 30,810,828 EQUITY Capital introduced211,652,804 1,652,804 1,652,804 1,652,804 Reserves22182,055 167,693 — — Retained earnings2352,166,001 57,674,759 22,966,371 29,158,024 Outside equity interest249,414,389 9,600,710 — — Total equity 63,415,249 69,095,966 24,619,175 30,810,828The above statement of financial position should be read in conjunction with the accompanying notes4PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesSTATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 30 SEPTEMBER 2012 Consolidated Parent 2012 2011 2012 2011 Note$ $ $ $Total equity at the beginning of the financial year 69,095,966 63,422,912 30,810,828 31,375,093 Profit after income tax expense for the year attributableto: Owners of the parent entity 17,103,612 16,791,642 16,420,717 11,569,365 Minority interest 2,032,349 1,965,518 — — 19,135,961 18,757,160 16,420,717 11,569,365 Other comprehensive income for the year, net of taxattributable to: Owners of the parent entity 14,362 48,268 — — Minority interest 3,552 11,937 — — 17,914 60,205 — — Total comprehensive income for the year attributable to: Owners of the parent entity 17,117,974 16,839,910 16,420,717 11,569,365 Minority interest 2,035,901 1,977,455 — — 19,153,875 18,817,365 16,420,717 11,569,365 Distribution of profit during the year (22,612,370) (12,133,630) (22,612,370) (12,133,630)Dividends provided for or paid4(2,222,222) (1,010,681) — — (24,834,592) (13,144,311) (22,612,370) (12,133,630) Total equity at the end of the financial year 63,415,249 69,095,966 24,619,175 30,810,828The above statement of changes of equity should be read in conjunction with the accompanying notes5PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesSTATEMENT OF CASH FLOWSFOR THE YEAR ENDED 30 SEPTEMBER 2012 Consolidated Parent 2012 2011 2012 2011 Note$ $ $ $Cash Flows From Operating Activities Receipts from customers (inclusive of GST) 140,669,241 141,800,130 138,380,023 139,327,807 Payments to suppliers and employees (inclusive of GST) (115,633,973) (120,255,564) (127,580,141) (132,361,625) Dividend received 4,630 4,717 8,986,069 — Interest received 1,224,211 1,320,482 280,988 949,942 Finance costs (1,395,997) (1,466,274) (3,897,177) (2,682,366) Income tax paid (5,107,383) (4,235,297) — —Net cash from operating activities2919,760,729 17,168,194 16,169,762 5,233,758 Cash Flows From Investing Activities Purchase of property, plant and equipment (397,995) (130,575) (397,995) (130,575) Proceeds from sale of property, plant and equipment 37,500 63,954 37,500 — Purchase of intangibles (100,000) — — — Loans to related party — — — (775,235)Net cash used in investing activities (460,495) (66,621) (360,495) (905,810) Cash Flows From Financing Activities Repayment of borrowings (4,000,000) (5,000,000) (4,000,000) (5,000,000) Loans from related parties (net) — — 10,577,508 13,397,201 Profit distributions paid (22,612,370) (12,133,630) (22,612,370) (12,133,630) Dividends paid (2,222,222) (1,010,681) — —Net cash used in financing activities (28,834,592) (18,144,311) (16,034,862) (3,736,429) Net increase (decrease) in cash and cash and cash equivalents (9,534,358) (1,042,738) (225,595) 591,519 Cash and cash equivalents at the beginning of the financial year 26,162,953 27,205,691 3,119,293 2,527,774 Cash and cash equivalents at the end of the financial year1, 616,628,595 26,162,953 2,893,698 3,119,293The above statement of cash flows should be read in conjunction with the accompanying notes6PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012NOTE 1 - SIGNIFICANT ACCOUNTING POLICIESThis financial report is a general purpose financial report prepared in order to satisfy Pelikan Artline Joint Venture's (referred to in this report as the parententity) financial report preparation requirements under the Joint Venture Agreement dated 24 December 1998.The financial report covers Pelikan Artline Joint Venture as an individual parent entity and Pelikan Artline Joint Venture and controlled entities as aconsolidated entity.The financial report was authorised for issue by the directors of Pelikan Artline Pty Limited, the agent for the Joint Venture, on 19 December 2012.Basis of preparationThese general purpose financial statements have been prepared in accordance with Australian Accounting Standards - Reduced Disclosure Requirements, otherauthoritative pronouncements of the Australian Accounting Standards Board and Urgent Issues Group Interpretations. The Pelikan Artline Joint Venture is afor-profit entity for financial reporting purposes under Australian Accounting Standards. Compliance with Australian Accounting Standards - Reduced Disclosure RequirementsThe financial statements of Pelikan Artline Joint Venture comply with Australian Accounting Standards - Reduced Disclosure Requirements as issued by theAustralian Accounting Standards Board (AASB). Early adoption of standardsThe parent and consolidated entities have elected to apply the following pronouncements to the annual reporting period beginning 1 October 2009:AASB 1053:Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian Accounting Standards arisingfrom Reduced Disclosure RequirementsHistorical cost conventionThe financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fairvalue of selected non-current assets, financial assets and financial liabilities.Principles of ConsolidationA controlled entity is any entity controlled by Pelikan Artline Joint Venture. Control exists where Pelikan Artline Joint Venture has the capacity to dominate thedecision-making in relation to the financial and operating policies of another entity so that the other entity operates with Pelikan Artline Joint Venture to achievethe objectives of Pelikan Artline Joint Venture.The financial statements of controlled entities are included from the date control commences to the date control ceases.Inter-entity balances resulting from transactions with or between controlled entities are eliminated in full on consolidation.Income TaxThe parent entity is not a legal entity subject to Australian or New Zealand income tax. Its income is taxable in the hands of the Joint Venture parties.The controlled entities are subject to Australian or New Zealand income tax and the tax balances disclosed in this report relate to these controlled entities.7PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Income Tax (continued)The charge for current income tax expense is based on the profit for the year adjusted for any non-assessable or non-allowable items. It is calculated using taxrates that have been enacted or are substantively enacted by the statement of financial position date.Deferred tax is accounted for using the statement of financial position liability method in respect of temporary differences arising between the tax bases ofassets and liabilities and their carrying amounts in the financial statements.Deferred tax is calculated at the tax rates that are expected to apply to the year when the asset is realised or liability is settled. Deferred tax is credited in thestatement of comprehensive income except where it relates to items that may be credited direct to equity, in which case the deferred tax is adjusted directlyagainst equity. Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductibletemporary differences can be utilised.The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxlegislation and the anticipation that the consolidated entity will derive sufficient future assessable income to enable the benefit to be realised and comply withthe conditions of deductibility imposed by the law.Revenue RecognitionSale of goods revenueRevenue from the sale of goods is recognised upon the delivery of goods to customers.Interest revenueInterest revenue is recognised on an accruals basis taking into account the interest rates applicable to the financial assets.Dividend revenueDividend revenue is recognised when the right to receive a dividend has been established.Promotional ExpenditureAdvertising and promotional expenditure (primarily catalogue expenditure) is recognised when incurred. The expenditure is incurred when the entity enters intoa binding commitment with the service provider.Foreign Currency Transactions and BalancesThe functional currency of each of the group's entities is measured using the currency of the primary economic environment in which that entity operates. Theconsolidated financial statements are presented in Australian dollars, which is the parent entity's presentation currency.Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currencymonetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at thedate of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.Exchange differences arising on the translation of monetary items are recognised in the statement of comprehensive income. Exchange difference arising on thetranslation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchangedifference is recognised in the statement of comprehensive income.8PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Cash and Cash EquivalentsCash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short‑term, highly liquid investments with originalmaturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value andbank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.Trade and Other Current ReceivablesTrade and other receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for impairment.Collectability of trade and other receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision forimpairment is established when there is objective evidence that the consolidated entity will not be able to collect all amounts due according to the original termsof receivables.The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at theeffective interest rate. The amount of the provision is recognised in the statement of comprehensive income.InventoriesInventories are measured at the lower of cost and net realisable value. Costs are assigned to inventory on hand by the method most appropriate to eachparticular class of inventory, with the majority being valued on a first in first out or average cost basis.Investments and Other Financial AssetsThe parent entity accounts for investments in subsidiaries at cost less impairment. The consolidated entity classifies its investments as available for salefinancial assets. Management determines the classification of its investments at initial recognition and re-evaluates this designation at each reporting date.Available for sale financial assets, comprising marketable equity securities, are non‑derivatives that are either designated in this category or not classified inany of the other categories. They are included in non‑current assets unless management intends to dispose of the investment within 12 months of the statementof financial position date.Purchases and sales of investments are recognised on trade date ‑ the date on which the consolidated entity commits to purchase or sell the asset. Investmentsare initially recognised at fair value plus transaction costs for all financial assets. Financial assets are derecognised when the rights to receive cash flows fromthe financial assets have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership.Available for sale financial assets are subsequently carried at fair value. Unrealised gains and losses arising from changes in the fair value of non monetarysecurities classified as available for sale are recognised in equity in the available for sale financial assets revaluation reserve. When securities classified asavailable for sale are sold or impaired, the accumulated fair value adjustments are included in the statement of comprehensive income as gains and losses frominvestment securities.9PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Investments and Other Financial Assets (continued)The consolidated entity assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired. In thecase of equity securities classified as available for sale, a significant or prolonged decline in the fair value of a security below its cost is considered indetermining whether the security is impaired. If any such evidence exists for available for sale financial assets, the cumulative loss ‑ measured as thedifference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit and loss ‑ isremoved from equity and recognised in the statement of comprehensive income. Impairment losses recognised in the statement of comprehensive income onequity instruments are not reversed through the statement of comprehensive income.Impairment of Financial AssetsFinancial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each statement of financial position date.Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financialasset, the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is thedifference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where thecarrying amount is reduced through the use of a provision account. When a trade receivable is uncollectible, it is written off against the provision account.Subsequent recoveries of amounts previously written off are credited against the provision account. Changes in the carrying amount of the provision accountare recognised in profit or loss.Property, Plant and EquipmentEach class of property, plant and equipment is carried at cost, less where applicable, any accumulated depreciation and impairment losses. Cost includesexpenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or recognised as a separateasset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the consolidated entity and the cost of the itemcan be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they areincurred.Plant and equipmentPlant and equipment are measured on the cost basis. The carrying amount of plant and equipment is reviewed annually by the directors to ensure that it is notin excess of the recoverable amount from those assets. The recoverable amount is assessed on the basis of the expected net cash flows which will be receivedfrom the asset's employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverableamounts.DepreciationThe depreciable amount of all fixed assets including buildings and capitalised lease assets, but excluding freehold land, are depreciated on a straight line basisover their useful lives to the consolidated entity commencing from the time each asset is held ready for use. Leasehold improvements are depreciated over theshorter of either the unexpired period of the lease or the estimated useful lives of the improvements.The depreciation rates used for each class of depreciable assets are:Class of Fixed Asset Depreciation RatePlant and equipment 7.50% - 66.77%Motor vehicles 15.00% - 20.00%10PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Property, Plant and Equipment (continued)The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date.An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverableamount.Gains and losses on disposal are determined by comparing proceeds with the carrying amount. These gains or losses are included in the statement ofcomprehensive income.LeasesLeases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred toentities in the consolidated entity are classified as finance leases. Finance leases are capitalised, recording an asset and a liability equal to the present value ofminimum lease payments, including any guaranteed residual values. Leased assets are depreciated on a straight line basis over their estimated useful liveswhere it is likely that the consolidated entity will obtain ownership of the asset over the term of the lease. Lease payments are allocated between the reduction ofthe lease liability and the lease interest expense for the year.Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the year in which they areincurred.IntangiblesIntangibles - Trademark LicencesTrademark licences are initially recognised at cost of acquisition. They have an indefinite useful life because they are subject to a written trademark agreementwhich does not limit the period over which they are expected to generate cash inflows. They are not subject to amortisation.Trademark licences are tested for impairment annually and are subsequently carried at cost less any accumulated impairment losses. An impairment loss isrecognised for the amount by which the trademark licence's carrying amount exceeds its recoverable amount.GoodwillGoodwill and goodwill on consolidation are initially recorded as an intangible asset at the amount by which the purchase price for a business or for anownership interest in a controlled entity exceeds the fair value attributed to its net assets at the date of acquisition. Goodwill has an indefinite life on the basisthere is no foreseeable limit to the period over which the asset is expected to generate cash inflows. They are not subject to amortisation.Goodwill is tested annually for impairment and carried at a cost less accumulated impairment losses.Impairment of AssetsAssets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Other assets are reviewed for impairmentwhenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount bywhich the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value inuse. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generatingunits).11PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Trade and Other PayablesThese amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of financial year which are unpaid. The amountsare unsecured and are usually paid within 30 days of recognition, with the exception of certain liabilities to employees that are usually paid within 12 monthsof the statement of financial position date.BorrowingsBorrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any differencebetween the proceeds (net of transaction costs) and the redemption amount is recognised in the statement of comprehensive income over the period of theborrowings using the effective interest method. Fees paid on the establishment of the loan facilities are recognised in the statement of comprehensive incomewhen they are incurred.Borrowings are classified as current liabilities unless the consolidated entity has an unconditional right to defer settlement of the liability for at least 12 monthsafter the statement of financial position date.Employee BenefitsWages and salaries, annual leave and sick leaveLiabilities for wages and salaries, including non‑monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of thereporting date are recognised in other payables in respect of employees' services up to the reporting date and are measured at the amounts expected to be paidwhen the liabilities are settled. Liabilities for non‑accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. Long service leaveThe liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to bemade in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience ofemployee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bondswith terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Retirement Benefit ObligationsSuperannuation contributions are made by the consolidated entity to employee superannuation funds and are charged as expenses when incurred.ProvisionsProvisions are recognised when the consolidated entity has a legal or constructive obligation, as a result of past events, for which it is probable that an outflowof economic benefits will result and that outflow can be reliably measured. Provisions recognised represent the best estimate of the amounts required to settle theobligation at the end of the reporting period.12PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Goods and Services Tax (GST)Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the AustralianTaxation Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.Receivables and payables in the statement of financial position are shown inclusive of GST. The net amount of GST recoverable from or payable to theAustralian Taxation Office is included with other receivables or payables in the statement of financial position.Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, orpayable to, the Australian Taxation Office, are presented as operating cash flow.Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the Australian Taxation Office.Financial InstrumentsInitial recognition and measurementFinancial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets,this is equivalent to the date that the economic entity commits itself to either purchase or sell the asset (i.e. trade date accounting is adopted).Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified 'at fair value through profit or loss'in which case transaction costs are expensed to the statement of comprehensive income immediately.Classification and subsequent measurementFinancial instruments are subsequently measured at fair value, amortised cost using the effective interest rate method or cost. Fair value represents the amountfor which an asset could be exchanged or a liability settled, between knowledgeable, willing parties. Where available, quoted prices in an active market areused to determine fair value. In other circumstances, valuation techniques are adopted.Amortised cost is calculated as:•the amount at which the financial asset or financial liability is measured at initial recognition;•less principal repayments;•plus or minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculated using theeffective interest method;•less any reduction for impairment.The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discountsestimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannotbe reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions toexpected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in the statement ofcomprehensive income.The consolidated entity does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of AccountingStandards specifically applicable to financial instruments.13PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Financial Instruments (continued)(i)Financial assets at fair value through profit or lossFinancial assets are classified at 'fair value through profit or loss' when they are held for trading for the purpose of short-term profit taking,derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluationwhere a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk managementor investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in profit or loss.(ii)Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and aresubsequently measured at amortised cost.Loans and receivables are included in current assets, except for those which are not expected to mature within 12 months after the end of the reportingperiod, which will be classified as non-current assets.(iii)Held-to-maturity investmentsHeld-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is theconsolidated entity's intention to hold these investments to maturity. They are subsequently measured at amortised cost.Held-to-maturity investments are included in non-current assets, except for those which are expected to mature within 12 months after the end of thereporting period, which will be classified as current assets.If during the period the consolidated entity sold or reclassified more than an insignificant amount of the held-to-maturity investments before maturity,the entire category of held-to-maturity investments would be tainted and would be reclassified as available-for-sale.(iv)Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivative financial assets that are either not capable of being classified into other categories of financialassets due to their nature or they are designated as such by management. They comprise investments in the equity of other entities where there isneither a fixed maturity nor fixed or determinable payments. Available-for-sale financial assets are included in non-current assets, except for those which are expected to be disposed of within 12 months after theend of the reporting period, which will be classified as current assets. (v) Financial liabilitiesNon-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost.Fair valueFair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlistedsecurities, including recent arm's length transactions, reference to similar instruments and option pricing models.ImpairmentAt the end of each reporting period, the consolidated entity assesses whether there is objective evidence that a financial instrument has been impaired. In thecase of available-for-sale financial instruments, a significant or prolonged decline in the value of the instrument is considered to determine whether animpairment has arisen. Impairment losses are recognised in the statement of comprehensive income.14PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Financial Instruments (continued)DerecognitionFinancial assets are derecognised where the contractual rights to receipt of cash flows expire or the asset is transferred to another party whereby the entity nolonger has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the relatedobligations are discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another partyand the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in the statement of comprehensiveincome.ComparativesWhere required by Accounting Standards and/or for improved presentation purposes comparative figures have been adjusted to conform with changes inpresentation for the current year.Critical Accounting Estimates and AssumptionsThe directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best available current information.Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within theconsolidated entity.Key Estimates - Impairment of Goodwill and Trademark LicencesThe consolidated entity tests annually whether goodwill and other intangible assets that have an indefinite useful life have suffered any impairment, inaccordance with the accounting policy stated in note 1.In assessing goodwill for impairment, sensitivity analysis was applied to key assumptions (being the growth and discount rates) used in value in usecalculations. As a result of this sensitivity analysis, there were no changes in key assumptions that were considered reasonably possible, which would causethe carrying amount of goodwill to exceed its recoverable amount and therefore no impairment has been recognised in respect of goodwill amounting to$28,493,303 or trademark licences amounting to $2,076,652 for the year ended 30 September 2012.15PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012 Consolidated Parent 2012 2011 2012 2011 $ $ $ $Note 2 Revenue Revenue Sales net of discounts and rebates allowed 123,785,950 126,288,905 123,785,950 126,288,905 Other revenue Dividend received 4,630 4,717 8,986,069 4,086,923 Interest received 886,128 1,415,432 1,118,991 949,942 Other operating revenue 152,152 201,512 92,278 126,946 1,042,910 1,621,661 10,197,338 5,163,811 Total revenue 124,828,860 127,910,566 133,983,288 131,452,716 Note 3 Expenses Depreciation - property, plant & equipment 483,561 613,395 362,571 367,257 Bad and doubtful debts expense Bad debts 44,004 123,276 44,004 123,276 Provision for impairment (18,385) (62,499) (18,385) (62,499) Total bad and doubtful debts 25,619 60,777 25,619 60,777 Foreign currency translation losses 39,874 73,884 — — Loss on disposal of property, plant and equipment 154,160 144,297 57,180 2,042 Rental expenses relating to operating leases 2,908,864 4,667,381 2,908,864 3,161,293 Note 4 Dividends Fully franked dividends - franked at tax rate of 30% 2,222,222 1,010,681 — — Balance of franking account at year end adjusted for franking creditsarising from payment of provision for income tax, franking debitsarising from payment of dividends recognised as a liability atreporting date and franking credits arising from receipt of dividendsrecognised as receivable at reporting date. 23,870,799 23,175,163 — —16PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012 Consolidated Parent 2012 2011 2012 2011 $ $ $ $Note 5 - Income tax (a) The components of income tax expense comprise Current income tax 5,044,021 4,549,150 n/a n/a Deferred income tax - recoupment of tax losses — 262,016 n/a n/a Deferred income tax - other items (79,504) (12,723) n/a n/a Deferred income tax - changes in tax rates — 1,860 n/a n/a Under provision in respect of prior years 5 611 n/a n/a Total income tax expense 4,964,522 4,800,914 n/a n/a Deferred income tax expense included in income tax expensecomprises:- Decrease in deferred tax assets (note 12) 38,661 213,388 n/a n/a Increase (decrease) in deferred tax liabilities (note 19) (118,165) 35,905 n/a n/a (79,504) 249,293 n/a n/a (b) Income tax reconciliation The prima facie tax on profit before income tax expense is reconciled to theincome tax expense as follows:- Prima facie tax payable on profit before income tax expense at 30% (Australia) & 28% (New Zealand) 7,223,688 7,067,422 n/a n/a Add (less) tax effect of:- Non allowable items (28,765) (23,611) n/a n/a Non assessable items 76 239 n/a n/a Change in tax rates — 1,860 n/a n/a Over (under) provision in respect of prior years 5 — n/a n/a Increase in tax losses not recognised (88) (263) n/a n/a Income tax not payable by parent entity - non taxable entity (2,230,394) (2,244,733) n/a n/a Income tax expense 4,964,522 4,800,914 n/a n/a The applicable weighted average effective tax rates are as follows: 21% 20% n/a n/a Tax effect relating to other comprehensive income: Deferred tax 7,678 25,802 n/a n/a Note 6 Current Assets - Cash and Cash Equivalents Cash at bank 10,245,830 3,263,833 2,528,353 2,168,604 Cash on deposit 6,382,765 22,899,120 365,345 950,689 16,628,595 26,162,953 2,893,698 3,119,293 Note 7 Current Assets - Trade and Other Receivables Trade receivables 33,651,723 35,510,561 33,651,723 35,510,562 Less provision for impairment (18,738) (37,501) (18,738) (37,501) 33,632,985 35,473,060 33,632,985 35,473,061 Current tax assets 29,260 47,093 — — Other receivables 1,312,577 1,259,305 1,216,439 858,126 34,974,822 36,779,458 34,849,424 36,331,18717PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012 Consolidated Parent 2012 2011 2012 2011 $ $ $ $Note 8 Current Assets - Inventories Stock on hand (note 1) 19,753,344 22,499,902 19,753,344 22,499,902 Note 9 Non-Current Assets - Receivables Loan to controlled entity - unsecured — — 11,539,398 10,701,395 Note 10 Non-Current Assets - Financial Assets Other Financial Assets Unlisted investments Shares in subsidiary companies (at cost) — — 40,853,792 40,853,792 Shares in unlisted corporations (at fair value) 520,844 495,252 — — 520,844 495,252 40,853,792 40,853,792 Parent Entity - Shares in other controlled corporations On 29 April 2005 the joint venture acquired 80.17% of the sharecapital of Geoff Penney (Australia) Pty Limited, which is also the100% holding company of Custom Xstamper Australia Pty Limitedand Pelikan Artline Limited. On 14 January 2009 the joint venture acquired 100% of the sharecapital of Spirax Holdings Pty Limited, which is also the 100%holding company of Spirax Industries Pty Limited, Spirax OfficeProducts Pty Limited, Spirax Holdings NZ Limited and Spirax NewZealand Limited. Consolidated Entity - Shares in unlisted corporations Shares in other corporations represent an investment in Shachihata(Malaysia) Sdn. Bhd., a private company incorporated in Malaysiathat manufactures certain products sold by the Consolidated Entity.The percentage owned is 2.38% and is carried at fair value. 18PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012 Consolidated Parent 2012 2011 2012 2011 $ $ $ $Note 11 Non-Current Assets - Property, Plant and Equipment Plant and equipment (at cost) 3,943,897 10,177,139 2,885,111 2,767,337 Less accumulated depreciation (2,649,567) (8,570,490) (1,829,535) (1,617,411) Total property, plant and equipment 1,294,330 1,606,649 1,055,576 1,149,926 Movements in carrying amounts Plant andequipment Total Consolidated Entity $ $ At 1 October 2011 Cost 10,177,139 10,177,139 Accumulated depreciation and impairment (8,570,490) (8,570,490) Net carrying amount 1,606,649 1,606,649 Year ended 30 September 2012 Net carrying amount at 1 October 2011 1,606,649 1,606,649 Additions 361,136 361,136 Disposals (189,894) (189,894) Depreciation and amortisation charge (483,561) (483,561) Net carrying amount at 30 September 2012 1,294,330 1,294,330 At 30 September 2012 Cost 3,943,897 3,943,897 Accumulated depreciation and impairment (2,649,567) (2,649,567) Net carrying amount 1,294,330 1,294,330 Plant andequipment Total Parent Entity $ $ At 1 October 2011 Cost 2,767,337 2,767,337 Accumulated depreciation and impairment (1,617,411) (1,617,411) Net carrying amount 1,149,926 1,149,926 Year ended 30 September 2012 Net carrying amount at 1 October 2011 1,149,926 1,149,926 Additions 361,136 361,136 Disposals (92,915) (92,915) Depreciation and amortisation charge (362,571) (362,571) Net carrying amount at 30 September 2012 1,055,576 1,055,576 At 30 September 2012 Cost 2,885,111 2,885,111 Accumulated depreciation and impairment (1,829,535) (1,829,535) Net carrying amount 1,055,576 1,055,57619PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012 Consolidated Parent 2012 2011 2012 2011 $ $ $ $Note 12 Non-Current Assets - Deferred Tax Assets Deferred tax assets 645,019 683,237 n/a n/a Deferred tax assets - movement Balance at the beginning of the financial year 683,237 897,520 n/a n/a Change in tax rates — (1,912) n/a n/a Unrealised currency gains and losses 419 1,022 n/a n/a Provisions (300) 60,600 n/a n/a Accruals (41,639) (8,989) n/a n/a Property, plant and equipment 3,302 (2,988) n/a n/a Tax losses — (262,016) n/a n/a Balance at the end of the financial year 645,019 683,237 n/a n/a Deferred tax assets comprise Provisions 259,200 259,500 n/a n/a Accruals 355,442 396,662 n/a n/a Property, plant and equipment 30,377 27,075 n/a n/a 645,019 683,237 n/a n/a20PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012 Consolidated Parent 2012 2011 2012 2011 $ $ $ $ Note 13 Non-Current Assets - Intangible Assets Trademark licence (at cost) 2,076,652 1,976,652 — — Goodwill (at cost) 28,493,303 28,492,523 50,795 50,015 30,569,955 30,469,175 50,795 50,015 Movements in carrying amounts Trademarklicence Goodwill Total Consolidated Entity $ $ $ At 1 October 2011 Cost 1,976,652 28,492,523 30,469,175 Accumulated amortisation and impairment — — — Net carrying amount 1,976,652 28,492,523 30,469,175 Year ended 30 September 2012 Net carrying amount at 1 October 2011 1,976,652 28,492,523 30,469,175 Additions 100,000 — 100,000 Currency fluctuations — 780 780 Net carrying amount at 30 September 2012 2,076,652 28,493,303 30,569,955 At 30 September 2012 Cost 2,076,652 28,493,303 30,569,955 Accumulated amortisation and impairment — — — Net carrying amount 2,076,652 28,493,303 30,569,955 Trademarklicence Goodwill Total Parent Entity $ $ $ At 1 October 2011 Cost — 50,015 50,015 Accumulated amortisation and impairment — — — Net carrying amount — 50,015 50,015 Year ended 30 September 2012 Net carrying amount at 1 October 2011 — 50,015 50,015 Currency fluctuations — 780 780 Net carrying amount at 30 September 2012 — 50,795 50,795 At 30 September 2012 Cost — 50,795 50,795 Accumulated amortisation and impairment — — — Net carrying amount — 50,795 50,79521PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012 Consolidated Parent 2012 2011 2012 2011 $ $ $ $Note 14 Current Liabilities - Trade and Other Payables Trade payables 8,315,979 11,230,530 9,155,515 11,510,273 Liabilities to employees 4,642,005 4,116,698 3,713,511 3,121,108 Other payables 10,308,222 12,434,581 9,657,386 12,059,162 Loans - unsecured — — 9,639,933 7,485,518 23,266,206 27,781,809 32,166,345 34,176,061 Note 15 Current Liabilities - Provisions Employee benefits - long service leave 1,675,543 1,644,271 1,009,524 966,271 Note 16 Current Liabilities - Short-term Borrowings Loans - Westpac (secured) 4,000,000 4,000,000 4,000,000 4,000,000 Note 17 Non-Current Liabilities - Trade and Other Payables Loans - unsecured — — 39,964,138 31,541,045 Note 18 Non-Current Liabilities - Long-term Borrowings Loans - Westpac (secured) 10,000,000 14,000,000 10,000,000 14,000,000 Note 19 Non-Current Liabilities - Deferred Tax Liabilities Deferred tax liabilities 122,711 233,199 n/a n/a Deferred tax liabilities - movement Balance at the beginning of the financial year 233,199 171,492 n/a n/a Receivables (104,706) 28,485 n/a n/a Prepayments (13,460) 7,420 n/a n/a Revaluation of available for sale financial assets charged directly to other comprehensive income 7,678 25,802 n/a n/a Balance at the end of the financial year 122,711 233,199 n/a n/a # Deferred tax liabilities comprise Receivables 15,230 119,936 n/a n/a Prepayments 10,162 23,622 n/a n/a Revaluation of available for sale financial assets 97,319 89,641 n/a n/a 122,711 233,199 n/a n/a Note 20 Non-Current Liabilities - Provisions Employee benefits - long service leave 267,844 241,307 69,863 54,30722PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012 Consolidated Parent 2012 2011 2012 2011 $ $ $ $Note 21 Joint Venture Equity Columbia Pelikan Pty Ltd Capital introduced 826,402 826,402 826,402 826,402 Share of joint venture profits - prior years 28,837,380 26,508,374 14,579,012 14,861,145 Share of joint venture profits - current year 8,551,806 8,395,821 8,210,359 5,784,683 Share of transfers to reserves - prior year 83,847 59,713 — — Share of transfers to reserves - current year 7,181 24,134 — — Distribution of profit (11,306,185) (6,066,815) (11,306,185) (6,066,815) Joint venture interest at the end of the financial year 27,000,430 29,747,628 12,309,588 15,405,414 ACCO Brands Australia Pty Ltd/GBC Fordigraph Pty Ltd* Capital introduced 826,402 826,402 826,402 826,402 Share of joint venture profits - prior years 28,837,380 26,508,374 14,579,012 14,861,145 Share of joint venture profits - current year 8,551,806 8,395,821 8,210,359 5,784,683 Share of transfers to reserves - prior year 83,847 59,713 — — Share of transfers to reserves - current year 7,181 24,134 — — Distribution of profit (11,306,185) (6,066,815) (11,306,185) (6,066,815) Joint venture interest at the end of the financial year 27,000,430 29,747,628 12,309,588 15,405,414 Total joint venture interests Capital introduced 1,652,804 1,652,804 1,652,804 1,652,804 Share of joint venture profits - prior years 57,674,759 53,016,747 29,158,024 29,722,289 Share of joint venture profits - current year 17,103,612 16,791,642 16,420,717 11,569,365 Share of transfers to reserves - prior year 167,693 119,425 — — Share of transfers to reserves - current year 14,362 48,268 — — Distribution of profit (22,612,370) (12,133,630) (22,612,370) (12,133,630) Joint venture interest at the end of the financial year 54,000,860 59,495,256 24,619,175 30,810,828 Outside equity interests in controlled entities (note 24) 9,414,389 9,600,710 — — Total equity as per the statement of financial position 63,415,249 69,095,966 24,619,175 30,810,828 * Under a Deed of Transfer and Novation dated 25 May 2011ACCO Brands Australia Pty Ltd replaced GBC Fordigraph Pty Ltdas a holder of GBC Fordigraph Pty Ltd's 50% interest in the PelikanArtline Joint Venture and as a party to the Joint Venture Agreements. The parties also agreed that the Joint Venture and its business asevidenced in the Joint Venture documents is a continuing partnership. Note 22 Reserves Available for sale financial assets revaluation reserve Balance at the beginning of the financial year 167,693 119,425 — — Movement during the year 14,362 48,268 — — Balance at the end of the financial year 182,055 167,693 — — The available for sale financial assets revaluation reserve recordsrevaluations of available for sale financial assets. 23PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012 Consolidated Parent 2012 2011 2012 2011 $ $ $ $ Note 23 Retained Earnings Movements in retained earnings were as follows: Balance at the beginning of the financial year 57,674,759 53,016,747 29,158,024 29,722,289 Profit attributable to owners of the parent for the year 17,103,612 16,791,642 16,420,717 11,569,365 Distribution of profit during the year (22,612,370) (12,133,630) (22,612,370) (12,133,630) Dividends paid or provided (2,222,222) (1,010,681) — — Dividends attributable to outside equity interest 2,222,222 1,010,681 — — Balance at the end of the financial year 52,166,001 57,674,759 22,966,371 29,158,024 Distribution to joint venture partners Columbia Pelikan Pty Ltd 26,083,001 28,837,380 11,483,186 14,579,012 ACCO Brands Australia Pty Ltd/GBC Fordigraph Pty Ltd 26,083,001 28,837,380 11,483,186 14,579,012 52,166,001 57,674,759 22,966,371 29,158,024 Note 24 Outside Equity Interests in Controlled Entities Outside equity interest comprises: Share capital 141,562 141,562 — — Reserves 657,544 653,992 — — Retained earnings 8,615,283 8,805,156 — — 9,414,389 9,600,710 — — Note 25 Commitments (a)Operating lease commitments Aggregate amount contracted for but not capitalised in the financialstatements and payable: Not later than 1 year 2,268,287 3,356,674 2,042,113 2,440,583 Later than 1 year but not later than 5 years 2,758,275 4,719,072 2,758,275 4,499,295 Greater than 5 years — 156,494 — 156,494 5,026,562 8,232,240 4,800,388 7,096,372 Operating lease commitments relate to: (i)Controlled entities lease property, equipment and motor vehiclesunder operating leases expiring from one to ten years. Leases generallyprovide controlled entities with a right of renewal at which all termsare negotiated. Lease payments comprise a base amount plus anincremental contingent rental. Contingent rentals are based on eithermovements in the Consumer Price Index or operating criteria. 24PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012 Consolidated Parent 2012 2011 2012 2011 $ $ $ $ Note 26 Assets Pledged as Security The parent entity has a bank overdraft, letter of credit, bill facilitiesand bank loan which are secured by a registered mortgage by PelikanArtline Pty Limited over all its assets and uncalled capital and overall the assets of the joint venture and the consolidated entity. Theoverdraft was unused at 30 September 2012 but an interest rate of10.41% was chargeable on overdrawn balances. The carrying amounts of assets pledged as security for the registeredmortgage debenture are: Cash and cash equivalents assets 16,628,595 26,162,953 2,893,698 3,119,293 Trade and other receivables 34,974,822 36,779,458 34,849,424 36,331,187 Inventories 19,753,344 22,499,902 19,753,344 22,499,902 Prepayments 902,198 922,226 833,018 843,002 Receivables — — 11,539,398 10,701,395 Financial assets 520,844 495,252 40,853,792 40,853,792 Property, Plant & Equipment 1,294,330 1,606,649 1,055,576 1,149,926 Deferred tax assets 645,019 683,237 — — Intangible assets 30,569,955 30,469,175 50,795 50,015 Total assets 105,289,107 119,618,852 111,829,045 115,548,512 Note 27 Economic Dependence A significant portion of the consolidated entity’s trading products are supplied by Shachihata, Inc., Japan. Note 28 Events after Balance Date Since the end of the year cash distributions of $1,101,600 in total have been made to the joint venture parties. Apart from the matter referred to above, no matters or circumstances have arisen since the end of the year which significantly affected or maysignificantly affect the operations of the joint venture, the results of those operations or the state of affairs of the joint venture in future financial years.25PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012 Consolidated Parent 2012 2011 2012 2011 $ $ $ $ Note 29 Cash Flow Information Reconciliation of profit after income tax to net cash inflow fromoperating activities: Profit after income tax expense for the year 19,135,961 18,757,160 16,420,717 11,569,365 Adjustments for: Interest received - non-cash — — (838,003) — Depreciation 483,561 613,395 362,571 367,257 Net loss on disposal of plant and equipment 154,160 144,297 57,180 2,042 Impairment provision - receivables (18,385) (62,499) (18,385) (62,499) Employee benefits - provision 57,809 488,812 58,809 286,813 Changes in assets and liabilities: Decrease (increase) in trade and other receivables 1,839,502 (556,333) 1,534,462 (461,370) Decrease (increase) in current tax assets 17,833 44,860 — — Decrease (increase) in inventories 2,746,558 3,724 2,746,558 3,724 Decrease (increase) in prepayments 20,028 (194,518) 9,984 (171,328) Decrease (increase) in deferred tax assets 38,218 214,283 — — Increase (decrease) in trade and other payables (4,515,604) (2,591,461) (4,164,131) (6,300,246) Increase (decrease) in current tax liabilities (80,746) 270,569 — — Increase (decrease) in deferred tax liabilities (118,166) 35,905 — — Net cash from operating activities 19,760,729 17,168,194 16,169,762 5,233,75826PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012 Consolidated Parent 2012 2011 2012 2011 $ $ $ $ Note 30 Related Party Transactions Parent and controlled entities The consolidated entity consists of the parent entity, Pelikan ArtlineJoint Venture and its controlled entities Spirax Holdings Pty Limited,Spirax Industries Pty Limited, Spirax Office Products Pty Limited,Spirax Holdings NZ Limited, Spirax New Zealand Limited, GeoffPenney (Australia) Pty Limited, Custom Xstamper Australia PtyLimited and Pelikan Artline Limited. Loans from related parties Aggregate amounts payable to related parties at reporting date:- Loans unsecured (current) - controlled entities 9,639,933 7,485,518 Loans unsecured (non-current) - controlled entities 39,964,138 31,541,045 49,604,071 39,026,563 Loans to related parties Aggregate amounts receivable from related parties at reporting date:- Loans unsecured (non-current) - controlled entities 11,539,398 10,701,395 11,539,398 10,701,395 Transactions with related parties Transactions between related parties are on normal commercial termsand conditions no more favourable than those available to otherparties unless otherwise stated. Transactions between the parent entity and its controlled entitiesduring the year consisted of:- Payment of interest on the above loans (2,501,180) (1,623,938) Receipt of interest on the above loans 838,002 775,235 Receipt of dividends 8,986,069 4,086,923 Recovery of overheads (7,621,094) (9,701,491) Distribution fee (14,268,341) (13,905,155) Key management personnel compensation 2,545,428 3,975,948 2,545,428 3,975,948 Purchase of inventory from joint venture partner related parties (1,816,720) (1,450,225) Recovery of administration and accounting services provided to ajoint venture partner 60,000 60,000 27PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2012 Consolidated Parent 2012 2011 2012 2011 $ $ $ $ Note 30 Related Party Transactions (continued) Guarantees provided to related parties Refer to note 26 for assets pledged as security by related parties Note 31 Financial Risk Management The consolidated entity's financial instruments consist mainly of deposits with banks, short-term investments, accounts receivable and payable, loansto and from subsidiaries and leases. The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed in the accounting policies to these financialstatements, are as follows: Financial assets Cash and cash equivalents (refer note 6) 16,628,595 26,162,953 2,893,698 3,119,293 Trade and other receivables (refer note 7) 34,974,822 36,779,458 46,388,822 47,032,582 Other financial assets (refer note 10) 520,844 495,252 40,853,792 40,853,792 52,124,261 63,437,663 90,136,312 91,005,667 Financial Liabilities Trade and other payables (refer note 14 & 17) 23,266,206 27,781,809 72,130,483 65,717,106 Other loans and borrowings (refer note 16 & 18) 14,000,000 18,000,000 14,000,000 18,000,000 37,266,206 45,781,809 86,130,483 83,717,10628

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