Hello. Good day to you, ladies and gentlemen, and welcome to the ACCO Brands' Second Quarter Earnings Conference Call. [Operator Instructions] The conference call is being recorded today, July 30, 2014. [Operator Instructions] I would now like to turn the call over to Jennifer. Over to you.

Good morning, and welcome to our second quarter 2014 conference call. Speaking on the call today are Boris Elisman, President and Chief Executive Officer of ACCO Brands Corporation; and Neal Fenwick, Executive Vice President and Chief Financial Officer. Slides that accompany this call have been posted to the Investor Relations section of accobrands.com. These slides provide detailed information to supplement this call. When speaking to quarterly results, we refer to adjusted results. Adjusted results exclude restructuring, merger related and debt refinancing costs and apply a normalized effective tax rate of 35%. Schedules of adjusted results and other non-GAAP financial measures and the reconciliation of these measures to the most directly comparable GAAP measures are in this morning's press release. During the call, we may make forward-looking statements and based on certain risks and uncertainties, our actual plans, actions and results the differ materially. Please refer to our press release and SEC filings for an explanation of these factors. Our forward-looking statements are made as of today's date, and we assume no obligation to update them going forward. Following our prepared remarks, we will hold a Q&A session. Now it is my pleasure to turn the call over to Boris Elisman.

Thank you, Jennifer, and good morning, everyone. As you know, we reported our second quarter results early this morning and overall, we are pleased with our performance. Net sales declined modestly, minus 2% at constant currency, and earnings per share were flat at $0.19. These were both slightly better than our expectations of improved trends in North America, including expanded placement in back-to-school categories as well as disciplined expense management and relentless focus on cost-reduction initiatives. Back-to-school in North America was a highlight in the quarter with significant uptick in placements, particularly in the mass channel. We broadened our product assortment to respond to consumer preference for lower-priced products, and we're taking full advantage of our U.S.-based manufacturing capability to market many of our products as American made. It's still a little bit early in the season but we're cautiously optimistic that sell-through in these product lines will be positive. We're also pleased with our execution against the ongoing retail channel shift from office superstores to the mass channels in retail as well as the consolidation and store closures taking place across the office superstore channel. Brazil remains a great market for us, and we saw net sales grow there in the second quarter despite the distraction of the World Cup, which slowed consumer business activity across the board in the last 2 weeks of the quarter. We're looking forward to another strong back-to-school season in Brazil, which primarily impacts our third and fourth quarters. In our Computer Products segment, we continue to refine our product portfolio and carefully manage our exit from low margin and commodity categories such as smartphones cases. We're also beginning to benefit from a reversal of sales declines in the PC and laptop categories, which helps our security business, still our most profitable category in Computer Products. In addition, we're leveraging our Mead and Trapper Keeper brands to create tablet cases that evoke iconic designs from the '80s. We expect incremental sales of these products in the third and fourth quarters. Finally, we're now benefiting from the restructuring actions that we announced late last year and began implementing in the first quarter. Most of our restructuring activity is now complete. As we did in the last quarter, we are reaffirming 2014 sales guidance of a decline in the mid-single digits and adjusted earnings per share of $0.70 to $0.76, and we continue to expect free cash flow generation of $140 million. With that, I'll ask Neal to provide additional detail on our second quarter results. Neal?

Thank you, Boris. Good morning, everyone. Our second quarter performance is recapped on Pages 2 and 3 of our slide deck. Second quarter sales decreased 3% or 2% at constant currency. The decline was driven by lower volume in our Computer Products and International segments. Adjusted net income was $22.6 million compared to $21.8 million in the prior year quarter. Earnings per share were even with the prior year at $0.19. Looking at the specifics. Gross margin was down slightly 60 basis points to 30.5%. We made great progress on both our cost savings and productivity initiatives, which together contributed 80 basis points to gross margin. We also had positive effects from pricing, product cost and FX, which combined, were a benefit of 70 basis points. But these items were offset by unfavorable sales mix of 130 basis points, which is partly due to some profitable product sales moving to later quarters. Gross margin was also offset by tablet accessory inventory charges and other items totaling 80 basis points. SG&A expenses were down in the quarter and at the margin level, improved 40 basis points to 19%. Cost savings were 150 basis points favorable. This more than offset the impact from the non-repeat of a $2.6 million gain on the sale of the building in the prior year, sales deleveraging and other items. Interest expense was down $3.1 million in the quarter, $10.2 million, a benefit of $0.02 per share. Turning to an overview of our segments for the quarter. In North America, sales decreased 1% and were flat on a constant-currency basis, a much improved trend from the previous quarters. Share gains and price increases were offset by sales declines with a large customer that recently merged. North America, our adjusted operating income increased 21% and adjusted operating margin…

[Operator Instructions] We have our first question today from the line of Arnie Ursaner.

My question relates to timing of some back to school. And obviously, back to school, you had hinted before, a lot of things would shift from June to the July quarter or July time frame, but yet indicated it was quite strong. Is there any way you can try to measure whether some things shipped earlier in the quarter or earlier in the back-to-school season versus your expectation and maybe tie it into a formal comment that Neal made about possible -- profitable sales moving to a later quarter?

There's lots of puts and takes in the quarter and things move out all the time. Bigger picture though, nothing has changed. We told you a quarter ago that we believe that, compared to prior year, this back to school will shift more from Q2 to Q3. That is still the case, even though we are pleased with how the back to school went in Q2, we do expect Q3 to be stronger than -- well, the seasonality between Q2 and Q3 to be stronger this year than last year due to some shift in shipments to a large customer from June to July. So if your question is did we pull something in from Q3 into Q2, is Q3 going to be weaker relatively. The answer is no.

Perfect. And just Neal, could you just expand on the profitable sales that moved to a later quarter, what area you're in and maybe give us a feel for the types of products involved?

Yes. They actually had nothing to do with back to school. They're to do with the dated calendaring products that we have and they, as I'm sure you'd appreciate, are a higher margin in the mix, and they will ship later in the year this year.

Neal, just one more quick one while I have you. You obviously have a credit agreement, which gives you dramatically more flexibility for share repurchase and you do expect significant free cash flow in the back end of the year. Just remind us of your priorities for free cash.

Well, right now, Arnie, as you know, we don't have the authorization from the board to buy back shares. Clearly, given the stock price and given that we do have the ability now to buy up to $60 million of stock, this is something that we will review with the board. The priorities still remain to delever the company. If we have acquisitions that are very accretive, we will look at them as well. But now, we have a third aspect to that mix of delivering value to shareholders, and we will seriously look at that from a -- from just a timing of cash, we don't get free cash until the end of Q3. So we have time to make the appropriate evaluations of what we need to do.

Next question is from the line of Brad Thomas of KeyBanc Capital Markets.

Just to follow up on the North America business and the outlook for the third quarter. We don't have too much history of the merged company with ACCO and Mead. Could you just give us a sense of how you think of the seasonality of the third quarter relative to the second quarter for sales and operating income?

Typically for North America, third quarter and second quarter are roughly similar from a revenue perspective, in that June is roughly similar to July and then it starts dropping off as back-to-school passes. It's typically a little bit better from a margin perspective. As Neal mentioned, we ship more calendars in Q3 than Q2, and that has a big effect on the margin in the quarter.

And obviously, we're coming off of a very good operating income quarter for the North America business. Would there be any reason for that to not repeat this year and to see operating income down in the third quarter relative to the second quarter?

That is not our expectation.

Great. And just with respect to the International business, could you give us a sense of how soft Europe has gotten relative to what you're expecting and then what the turns have been in Brazil and Mexico?

Sure. Europe was a little bit softer than we expected. As Neal mentioned in his prepared remarks, it's very choppy. One quarter may be a little bit better, one quarter may be a little bit worse, and I wouldn't be surprised if in the subsequent quarters, we also see some of that volatility in Europe. Year-to-date, we are on track to our plans in Europe because Q1 was a little bit better than we expected. As I mentioned, Q2 was a little bit worse. So from a macro perspective, we noticed that Europe was a little bit weaker overall in the second quarter, but it's still within the broad span of our expectations. Brazil had a good quarter. It slowed down, as we mentioned, in the last couple of weeks of the quarter as Brazil pretty much shut down to watch World Cup and to go to the games. But Q2 is a relatively small quarter in Brazil. Even with that slowdown, we still saw strong high single-digit growth at constant currency. Mexico was a little bit slow in Q2. Some of that has to do with World Cup as well, and some of that is just they had a really strong Q1. So it was just a catching up from the first quarter.

Okay. And then just one last housekeeping item. You mentioned a write-down on some of the tablet accessory inventory. Could you quantify what that drag was?

The drag was significant. We effectively made no money on that segment of -- or subsegment of Kensington as a result of taking higher charges. And the total impact on the year -- or the total impact was about 80 basis points for the whole company as opposed to just the Kensington segment. But the lion's share of the impact, obviously, ran through the Kensington segment.

Got you. And so, as we look to the back half, is that all out of the system at this point, and so, should we be looking for better results perhaps a year-over-year improvement in operating income in Computer Products?

The worst of the repositioning of that piece of Kensington is behind us, we believe. And it was a significant drag on Q3 and Q4 last year, and it's been a significant drag on Q1 and Q2 of this year. But we think we're largely through annualizing the negative drag impact for that subsegment of Kensington.

I just want to add on to what Neal just said. The other thing is, we feel -- we have -- feel very confident that the rest of the business, we'll be able to overcome whatever volatility we may still see in the Kensington part of the business. So it remains volatile, as Neal mentioned. Most of the bad things are behind us, but you never know what the future holds, but I do feel very, very confident that our performing in the rest of our business will be able to subsume that.

The next question is from the line of Bill Chappell of SunTrust.

Can you just maybe give us more color on, I guess, the excitement on back to school? And just trying to understand the maybe product placements? Is it more at the mass channel? Is it more product placements in specialty channel? Is it more Mead-related versus the legacy ACCO, kind of consumables versus durables? Kind of give us more color on what gets you so excited over the next few months.

It's all of the above. Let me give you more color. It's definitely driven by more placements, more placements primarily in notebooks, calendars and school accessories, such as locker accessories. There's more placement in mass and in the big mass chains, more placement in drugstores and significantly more placement and more sell-through through the online channels. So the channels that are growing are getting more placement. We're getting increased share. It's still too early to talk about sell-through. We're very, very early in the cycle, but there was significantly more placement this year than last year.

And is that driven by kind of new product introduction? Or you're taking share from smaller players?

It's both. It's driven -- we introduce new products every year: new colors, textures, new designs. But there's over 1,000 SKUs being introduced every year for back to school. So we are taking share from big and small players.

Okay. And then switching, you said in the release that, I guess, the merger of OfficeMax, Office Depot did have an impact on the quarter. Is there any way to gauge that for us? And then also, is that expected to increase over the next few quarters? Or is this kind of in line with expectations?

It is in line with expectations. We had to rationalize some terms for Office Depot and OfficeMax, which moved some shipments out of Q2 into future quarters. Their line reviews are still ongoing. We've now won 2 and lost 1, but everything is proceeding to our expectations. Just to remind you, they did mention that they plan to close at least 400 stores in the next, I believe, it's 2 years or so. And they said that 125 will close after back to school of this year. All of that is built into our guidance. So we're very happy with how the integration is going, how our team is doing, managing the coming of those 2 store chains.

Got it. And then just last one for me. Was there any way to quantify the Brazil kind of pushout? Or was that always also in your expectations?

It's such a small quarter for Brazil. Even though we did see a meaningful slowdown in sales for them, overall, from an enterprise perspective, it didn't make a difference.

Next question comes from the line of Chris McGinnis of Sidoti & Company. Christopher McGinnis - Sidoti & Company, LLC: Just quickly, I guess, a follow up on the strength of North America. Is there any other markets that were better? Or can you point out just outside of the back to school, any help in the quarter?

All of the markets were within the expectations. North America, and this is both U.S. and Canada, was slightly better. As I mentioned on -- to a previous -- on a previous answer, our placement is a little bit better. We're taking a little bit more share. And our channel partners are being a little bit more aggressive this year, at least so far, in driving back-to-schools than they were last year. So it is primarily driven by North America. Christopher McGinnis - Sidoti & Company, LLC: And then, just to touch on the computer side. Obviously, it's a small piece of the business, but is there a point where maybe -- is there more cost cuts to come? Or do you feel that with the improvement, you're starting to see that maybe there's a better profit profile there going forward?

No. Fixing our Computer Products business is a long-term fix, so there absolutely will be more things that we'll need to do, to not only stabilize that business but to reignite the growth of that business, and I expect that will take several quarters for us to do. As Neal mentioned in his prepared remarks, we're pleased with the progress on the PC accessory side. We saw growth this last quarter. And it's a stable part of the business, and we just need to leverage that into more success. And then, obviously, we need to fix the tablet accessories part. So I do expect more fine tuning and changes in the Computer Products business.

Q3 and Q4 are seasonally much more important and stronger profit quarters for the Computer Products segment, particularly in security and PC accessories space. So we do feel very confident that the second half of the year, just because of seasonality, will be much stronger than the first half of the year.

And the next question comes from the line of Kevin Steinke of Barrington Research.

So advertising and SG&A expense is -- it was actually down a little bit sequentially. And just wondering how you're thinking about the second half of the year if we could expect continued stable expenses or if there's more investments to make or if they can actually come down a little bit in the second half?

The sequential decline that you're referring to is due to the restructuring activity that we implemented earlier this year. Second half, we should see similar SG&A spend to the second quarter. As I mentioned on previous calls, we believe right now, our ratio of SG&A of around 19.5% is in the ballpark, where it needs to be in the long term. So you should see something similar.

Okay. And the decline in Europe you saw, it sounds like that's just kind of economic or market related. I know you've been pleased with performance there lately. So just any additional color on Europe.

Yes, it's a little bit economic and market related and also a little bit the year-over-year compares. Last year, Q2 was very, very strong, atypically strong for Europe. So comparing this year, it looks a little bit weaker than it is. But it is within the scope of the overall expectations, and I'm not overly concerned about it.

Okay. And the stabilization you saw in PC, security and laptop products, would you attribute that to just stabilization of the overall market? Or do you feel like you made some share gains there?

We think it's more market related. The PC market, especially the commercial PC market, is showing a little bit of growth. And we think that's helping us and drive PC accessories and security accessories into that market.

Great. And lastly, what are you seeing on the acquisition front? Specifically, I think you talked about in the past that you'd like to do more in emerging markets? Are you seeing opportunities there? So yes, I guess, that's the question.

We do see opportunities in emerging markets. But as we mentioned, we're going to be very prudent and diligent in reviewing that and making sure that it's the right thing for our company and for our shareholders. So there's no change in the number of opportunities that exist out there.

And the next question is from the line of Kevin Ziets.

I had a follow up on the amendment. I was curious with the ability to do to share repurchases, I guess, up to 4x leverage with the $60 million. Are you -- is there a change to your preferred leverage target? Or maybe, more importantly than that, sort of how quickly you think you'll get to that target?

There is no change in our target. We want to be in that 2x to 2.5x range. Given the additional flexibility to buy back shares, it may change the timing. So this is something that we need to still discuss with the board and analyze but it may change how quickly we get there.

Okay. And is it -- with the cash you're generating and the flexibility you have, is it an either-or decision in terms of whether you'll do share repurchases or acquisitions? Or is there a potential that you might do both in a sort of balance?

We don't think it's an either-or decision. We think we generate enough cash to delever and potentially do acquisitions and, if the board decides, potentially do share repurchase as well. So we think that we can do all 3.

Okay. And can you say, sort of, generally where purchase multiples or acquisition multiples are these days in terms of the types of opportunities you're looking at? Or is it too wide of a range?

It's too broad of a range and we can't really comment on that.

In terms of the placements that you picked up, can you quantify in terms of, I don't know, shelf space or some other metric, how much space you think you gained going into this back-to-school season?

We don't have a number to share with you. It is a meaningful pickup in terms of shelf space. But the most important thing that we still have to see is how all this stuff will sell through, and that's why it's really important to help our channel partners sell it through, make sure that we have the right merchandising, the right promotional programs, right advertising in place. And then, at the end of Q3, we'll be in a better position to determine how successful all of that is.

Okay. Are they generally existing customers? Or have you picked up some new relationships on the way?

No, they're all existing customers. They're very, very broadly distributed, so it's very difficult to find customers who don't carry our products.

Fair point. And then you also mentioned that you were responding to demand for lower price points or -- my question was about the -- you mentioned you were responding to demand for lower price points that you saw last season. I'm curious, if you think you've narrowed price gaps between yourselves and private label and sort of if there's anything you can quantify about that or at least comment.

Rather than that, I think we're able to work with our channel partners for them to present a better assortment to their consumers, a more balanced assortment that covers a range of price points from entry level, where we still don't really participate to mid-price points, where we now do participate with a much broader assortment as well as premium price point. So it's really changing the merchandising mix that we were able to work with our channel partners on away from very low end to more balanced portfolio that really drove this incremental placement and hopefully will drive an incremental sell-through as well.

Okay. So it sounds like maybe you filled in some mid-price points that didn't exist or?

Yes, that's correct.

And my last question is on the restructuring activity. You mentioned that, that was coming to an end. Or I'm curious if you fully run rated it? And if you had a full run rate in the second quarter or if we'll see that in the third quarter, and secondly, on cash restructuring costs when they wind down?

So in terms of the actual -- I mean, we issued good guidance about the timing of the benefits we anticipated when we first issued our restructuring. We're in line for that. And so, from an executional point of view, we're about 2/3 of the way through the execution of the restructuring that we were doing in North America. There is still 1/3 of the execution that will occur in the second half of the year. And so, there's a significant benefit that extends into 2015. And also, there will be a higher run rate savings that goes into the second half of the year.

As a reminder, what we said is, we're going to realize $16 million in benefits this year and another $8 million in benefits next year. And we're on track to deliver that.

I will now turn the call back over to Boris Elisman, CEO for closing remarks.

Thank you. In closing, let me thank you once again for joining us this morning, and I look forward to speak with you on our third quarter call and providing more detail on the results of our back-to-school initiatives. Enjoy the rest of the summer. Thanks.

Thank you very much, ladies and gentlemen. That now concludes your conference call for today. You may now disconnect. Thank you.