Good day, ladies and gentlemen and welcome to the Q3 2014 ACCO Brands Corporation Earnings Conference Call. My name is Tracy and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a Q&A session towards the end of the conference. (Operator Instructions) As a reminder, this call is being recorded for replay purposes. And now, I would like to turn the call over to Jennifer Rice, Vice President of Investor Relations. Please proceed, ma’am.

Good morning, and welcome to our third 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 a 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 could differ materially. Please refer to our press release and SEC filings for an explanation of certain of these risk 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. Our third quarter performance was strong on both top and bottom lines driven by significant improvement in back-to-school sales in North America. The International and Computer Products segments met our expectations for the quarter and we continued to keep control of our expenses and pursue productivity improvements, which also contributed to our favorable results. On a constant currency basis, sales increased 1%. Adjusted net income increased 21% to $35.2 million or $0.30 per share. While North America was clearly the star performer for the quarter, I am pleased with our execution across the board in every segment and function. Our teams did an excellent job delivering in what remains a difficult environment overall. Our biggest gains were in back-to-school in the mass channel in the U.S., where we took market share in notebooks and school calendars. E-tail back-to-school sales grew double-digits albeit on a smaller base. These gains help offset anticipated declines in the office superstore channel related to customer consolidation. Canada also has strong back-to-school sales across all of its major channels. Overall, North American sales were up 1% and adjusted operating income was up 29% in the quarter. In our International segment, sales increased 3% at constant currency and adjusted operating income also increased 3%. Sales in Brazil were positively impacted by continued market share gains in the premium notebook category as well as the implementation of price increases that offset commodity cost increases and labor inflation. In Mexico, we gained share due to sales growth in the secondary markets outside of Mexico City. Sales were roughly flat in the Asia-Pacific region and down low single-digits in both Europe and Australia largely due to macroeconomic and industry-wide conditions in those geographies. In Computer Products, sales were down 9%, but in line…

Thank you, Boris. Good morning everyone. Our third quarter performance is recapped on Pages 2 and 3 of our slide deck. Third quarter sales increased 1%. The biggest driver behind the improved sales trend was the market share gains during our strong back-to-school in North America. We also saw a sales growth in international driven by our continued strong execution in Brazil and Mexico. Adjusted earnings per share increased nicely to $0.30 from $0.25 in the prior year. Looking at the specifics, strong gross margin improvement drove most of the earnings growth. Gross margin expanded 210 basis points to 32.2%. Much of the improvement was due to an easy comparison to the prior year quarter when we had a very weak gross margin. We returned to a more normal gross margin level in the current period and we continued to see the benefit of our ongoing cost savings and productivity initiatives, which contributed 80 basis points to gross margin. SG&A expenses were higher in the quarter, increasing 50 basis points as a percentage of sales to 17.8%. The increase was the result of $5.7 million negative effect or 110 basis points from higher year-on-year incentive compensation accruals. The delta is partly due to reversals in the prior year quarter. Cost savings were again favorable by 80 basis points. Interest expense was down $1.5 million in the quarter to $10.9 million, a benefit of $0.01 per share. Turning to an overview of our segments for the quarter, in North America sales increased nearly 1% on a constant currency basis, a much improved trend from previous quarters. Strong performance during back-to-school particularly in the mass channel and to a lesser extent in E-tail offset the significant decline we are seeing at emerging office superstore customer. North America adjusted operating income increased 29%…

Thank you. (Operator Instructions) Your first question comes from the line of Brad Thomas from KeyBanc Capital Markets. Please proceed.

Thank you. Good morning, Boris, Neal and Jennifer and congratulations on a great quarter here.

Thanks Brad. Good morning.

I wanted to first ask about some of the market share gains that you had in back-to-school and I was wondering if you could share a little bit more color on the magnitude that they helped sales in the quarter and then talk a little bit about the ability for those wins to carry forward into the coming quarters?

If you look at the increase in sale pretty much all of it was driven by the change in North America from prior year and all of that was driven by the wins at back-to-school, especially in mass and e-tail. If you look at back-to-school from an industry perspective depending on the sources and the categories included, it was roughly flattish back-to-school, for office supplies maybe up low single-digits. We grew mid single-digits in our categories that we clearly took share and it was the difference for us in the quarter. The second part of your question how sustainable is that going forward? We have to fight for shelf space every year certainly as an incumbent. We – there is a benefit to us and we believe that we have demonstrated good performance and significant benefit for our customers, but we will find out in the next couple of months by the end of December what our position is for back-to-school in 2015.

But from – and from a timing standpoint, the shelf space that you won in the second and third quarters, those should stay relatively in place for the coming couple of quarters, if I understand you correctly?

Well, back-to-school especially Brad, especially at mass is a seasonal aisle. So, they take it down and then they put Halloween stuff and then they take that down and put Christmas stuff there. So, we certainly have inline presence overall at most, if not all of the stores, but the incremental volume for back-to-school specifically for the seasonal isle is very, very significant and that goes away.

Got it. And then if I could just add a follow-up on the international side, if you could talk a little more about the success in Brazil and Mexico, how much those added international sales and what the outlook is for those markets as well?

Sure. Let me start with Mexico. Mexico’s economy is doing better. It’s kind of tracking U.S. with the recovery. And Mexico for us grew high single-digits during the quarter. We are very, very pleased with our performance during this particular quarter. It was driven primarily by both back-to-school as well as increased sales outside of the core markets in Mexico, which is mainly Mexico City. If we look at Brazil, we mentioned at the last call that we saw weakness in Brazil, macro weakness at the end of Q2 that was really associated with the onset of the World Cup. That really has remained throughout Q3. We did not see any improvement after the World Cup ended. Despite that, our sales also grew high single-digits and we took significant share and that was primarily in premium notebook categories.

Great. Congratulations again and I will turn it over somehow.

Thank you, Brad.

Thank you for your question. Your next question comes from the line of Bill Chappell from SunTrust. Please proceed.

Good morning.

Good morning Bob.

Hi. It’s nice to see a raise of guidance I can’t remember that in 7, 8, or 9 years.

Hopefully, it won’t be the only time.

Absolutely, just first, kind of trying to dissect the back-to-school season in your North American results, I mean if you took out the consolidation issues at one customer, I mean can you give us kind of an idea what the growth would be and also maybe what overall kind of category sales were back-to-school versus kind of your shelf space gains?

We haven’t done the calculation, if you take out that single consolidated customer, but it would be significant sales if that customer were down. We mentioned that we – last time we spoke we won two categories, we lost one. There was another decision made during the quarter, so now we have one-three, we lost one. The one we lost which is Bindery is a big back-to-school category. So sales obviously in Bindery there were down significantly, which drove the overall sales. Neal just did the calculation of line and he believes the sales would have be up in North America by 15% in the quarter where it’s not for the consolidating go back-to-school by the customer.

15%.

I am sorry.

You said 15%.

Yes, it’s meaningful. I mean we – as we mentioned during the prepared remarks we gained significant share, it was broadly based and wasn’t just one customer. It was broadly based across mass and e-tail. And it was primarily in notebook categories. All across the board we have had presence in better price points. We were able to step up our customers. We got a chance to manage the whole category for many of the customers, which drove obviously significant sales growth and for them they are pleased with our performance. And then, we also had a much better performance in the academic appointment books where we took significant shares while compared to prior year.

And I think this is the time now for maybe the next few months you go into big offs for next year’s back-to-school, I mean do you feel like that you have momentum where you can continue to get shelf space gains like this?

It – certainly it’s our intention to retain the shelf space. We think we have demonstrated through our performance that we deserve to retain them, but we have to fight it out to your point then we will know by the end of the year. I am optimistic but and I am not counting on it yet.

Got it. And then as you look at like kind of the two drags on sales, both the large customer and then kind of computer products, what’s kind of the outlook over the next and I am thinking more kind of two, three quarters and not specific but just trying to understand like did we see the greatest drag for both of those this quarter and it starts to get better or does it get worse before it gets better for both computer products and kind of the consolidation of a large customer, I mean how do we look at the next six months I guess?

Yes. And there are different answers for the two obviously. The computer products side I think the worst is behind us. We should see sales declines to taper as we go forward. I still expect declines as we get out of these commoditized categories so until we completely anniversary that we will see some top line declines. But we saw a bottom line improvement this quarter. And I expect that to sustain going forward. So I expect that the profits in the Computer segment to improve. Regarding the consolidating customer, it’s hard to tell, we will see – clearly we will see declines. So the magnitude is going to depend on the store closure impact that we will see. We expect to see a significant one in Q4 as Office Depot said they are going to close 150 stores after back-to-school. That will have a significant impact. And then we expect a couple of hundred stores to be closed next year as well. So that will have a significant impact as well. The thing that I have said that we need to estimate is the number of distribution centers that will close as a result and the inventory impact of those closures. That’s really what has a bigger impact on our sales. It’s not so much the store closure side because the inventory that will rebalance from somewhere else, but the fact that they carry a less inventory they buy less from us and they need less from us on the go forward basis, that we will have a one-time impact on our sales but that may last few quarters.

Got it. Thanks for the color.

Thank you. Thanks, Bill.

Thank you for your question. Your next question comes from the line of Arnie Ursaner from CJS securities. Please proceed.

Hi. I will start by following up with the last question you just had, do you have a good sense of the inventories at your customers that are closing various stores and if they were waiting for back-to-school now that, that’s over have you already seen a dramatic change in their order patterns?

The inventory just in general, let me just make a general comment on the inventory, the inventory coming out of Q3, I think is lower than it has been typically than the quarter. Typically, there are some incentives for customers to bulk up on inventory at the end of the quarter. We did not see that take place at the end of Q3. So, the inventory profile is pretty clean with pretty much all of our customers. As far as the impact of store closures, we have been seeing that throughout the year. I think our consolidating customer has been preparing for store closures for quite a while. So, I anticipate the same level of reductions. It’s hard for me to tell that’s going to be greater than that, because as we just mentioned, it’s been pretty significant so far year-to-date.

Question for Neal, you mentioned you bought back about 800,000 shares in the quarter, did you buy any additional shares post the end of the quarter?

Yes, we have purchased about another 1.5 million since the end of the quarter.

Okay. And obviously with your cash flow now having its strongest phase, you want to comment priorities for free cash?

Our priority for our free cash flow is predominantly going to be debt paydown, but we will still remain purchasing shares as we go forward on a periodic basis.

Okay. And for Boris, you mentioned I think in your prepared remarks, you expect next year to be a difficult environment. I have assumed you are doing a lot of bottoms up gathering of data and I know you will provide your formal views in February, but what is your early view of next year telling you?

From an environment perspective, Arnie, we think it’s going to be very, very similar to this year, especially to this Q3 with a couple of exceptions. We think there will be a more meaningful impact from store closures in OSS somewhere between probably 10% and 15% of retail stores will be closed from a year-to-year comparison and that will have an impact on our sales. We think the foreign currency environment will remain weak. Neal mentioned in his prepared remarks that we will see an impact – a greater impact of that in Q4 of this year and we anticipate that will sustain through 2015. And then the last we have seen emerging markets in Europe weaken during the year. And from a planning perspective at least, we don’t expect any recovery in 2015. So, we will do some additional headwinds that we anticipate in 2015. Obviously, we will have some contingency plans that we expect to execute well – continue to execute well, but there will be these additional headwinds.

Thank you very much.

Thanks, Arnie.

Thank you for your question. Your next question comes from the line of Chris McGinnis from Sidoti & Company. Please proceed. Chris McGinnis - Sidoti & Company: Good morning. Thanks for taking my questions.

Good morning, Chris. Chris McGinnis - Sidoti & Company: Just – I guess just to follow-up on that can you maybe talk a little bit about on the office or the back-to-school, what the exact changes were? Was it just a better selection or was it a stronger partnership going into the back-to-school to see that strength?

I think it’s both, Chris. And you also have to keep in mind the year-to-year compares. A year ago when we spoke with you at this time, we told you we were very disappointed in our performance for back-to-school. And we mentioned the time that the most of the customers went really low to opening price points and that hurt us. I am and obviously I think it hurt them as well. So, we have parked with them much closer this year. We were able to convince them to have a much more balanced price point assortment this year. And as a result, we gained significant share in both us and them perform better during this back-to-school season. So, it was both the assortment as well as the partnership. Chris McGinnis - Sidoti & Company: Great. And then lastly, maybe just a little bit more detail on the online with the shift that is happening, you said it wasn’t as great as obviously the growth in the retail base, but are you seeing that the gains or I guess at least the share loss maybe or the sales loss, are you seeing any traction on the online side and maybe just dig a little bit deeper into that in the higher position?

Yes, just to clarify, Chris, we saw tremendous gains in e-tail for back-to-school is just as a percent of our sales, it’s a much smaller number than mass. So, it had a lesser impact on our back-to-school revenues, but online for our sales grew strong double-digits and actually their sellout grew triple-digits. So, it was a tremendous performance for the online channel. They clearly are taking significant share in the fact are becoming one of the destination places for back-to-school sales. Chris McGinnis - Sidoti & Company: Great, thank you.

Thanks, Chris.

Thank you for your question. Your next question comes from the line of Kevin Steinke from Barrington Research. Please go ahead.

Good morning. You just mentioned the sell-through on the e-tail channel, I was just going to ask about sell-through on back-to-school season for North America in general and how that went?

It went well. Depending on – again, depending on who is counting, our sell-through was up anywhere from 2% to 8% depending on the category, which was significantly higher than the overall industry-wide back-to-school. So, we are very pleased with our performance.

Okay. And your comments about taking share in Brazil despite the weaker environment there, does that apply to back-to-school season, any comments on how that’s trending?

That’s still to be played out. Back-to-school there is we ship in Q4 and the sellout is in Q1. We are optimistic. We certainly have all the signals that we are going to continue to do well in Brazil. As you know, the economy there is pretty weak there in the unofficial recession in Brazil and we anticipate a little bit of weakness, because some of the customers may not want to take the inventory until early in 2015 as opposed to at the end of ‘14. So that may impact our Q4, but overall from a larger picture perspective, we expect to continue to do well in Brazil.

Okay, great. And then I was wondering if the shift in timing of calendar products, if that had a meaningful impact on the third quarter?

No, it didn’t have a particularly meaningful impact on the third quarter. That’s one of the things that you do see is a very substantial increase in the margins that comes through in the North American segment during the quarter and that really was driven primarily through cost reduction initiatives that we had. Some of which were in the dated area, but also a very significant driver about 40% of the increase comes from taking ourselves out of some very low margin categories, particularly the bindery category that Boris mentioned and reversing some unproductive rebate programs that also contributed to the cost reductions. Those were the two big drivers that helps the North American margin rebound so much. And as Boris mentioned earlier, it was rebounding off a very poor Q3 last year. So, it wasn’t easy compare as well as having added cost reduction this year.

Okay. And Neal, could you just clarify the comment on currency impact in fourth quarter, I think you said a 3% sales decline, is that do you mean on top of whatever sort of sales growth or decline that you would expect in the quarter?

That’s right. That’s purely from translation of foreign results. We have a large mix of non-U.S. sales in the fourth quarter and particularly with Brazil being so large in the fourth quarter, which is one of the more adverse foreign exchange movements, that’s what will cause the big increase to be at 3% decline on just pure translation.

Okay. Thanks for taking my questions.

Thanks Kevin.

Thank you for your question. Your next question comes from the line of William Reuter from Bank of America. Please proceed.

Good morning guys.

Good morning, Bill.

You talked about your ability to get some of your wholesale customers to put a more balanced product assortment in this back-to-school, I was wondering if you could talk little bit about your sell-through rates among some of the more value-oriented products versus some of the products that are a little higher priced?

Yes, just to clarify Bill, the assortment was a more balanced assortment was mass wholesale customers carry all of our products, so that was never an issue. But we were successful in getting a more balanced assortment in the mass for this back-to-school. The increase in sellout was across all the older price points and it was both branded and also private label products. So, it was a very, very broad based. We are pleased across the board. It was a great quarter. We executed really well. So, it’s hard to find fault in anything that happened for this back-to-school.

Okay.

And completely sell-through all of the seasonal aisles, so there is no inventory left in the channel for the seasonal product that they expand to.

Okay. And then you talked a little bit about the fact that we are going to continue to see some sales declines in the Computer Products segment until we have anniversaried I would say the exit of the commodity like products, can you remind us when that was such that I guess the comps will get a little easier?

From memory it’s going to be around Q2 of ‘15 we are going to see drag for the next couple of quarters, but it should get significantly better in Q2.

Okay. And then you talked about debt reduction as one of your goals, I guess this should we that this would just be the term loan A or would you guys consider repurchase of the 6.75 in the open market?

We will predominantly take our bank debt down.

Okay. And then just lastly for me, your leverage goal of 2 to 2.5 times is still stand?

Yes, it does.

Okay, that’s all for me. Thanks guys.

Thanks, Bill.

Thank you for your question. Your next question comes from the line of Karru Martinson from Deutsche Bank. Please proceed.

Good morning. When you guys look at the mid-single digit gains that you had with the back-to-school season, who do you figure you are taking share from and kind of what’s the differentiator why you guys are gaining the share?

I think we are able to offer a better product assortment and a better step up strategy for our customers. I think they were unhappy with how they performed or some of them were unhappy with how they performed a year ago and they wanted to do something different. They felt that our both assortment features price points and merchandising support helped them to achieve their objectives and they were right. So, we are pleased they went with us and then hopefully that will continue next year as well.

And in terms of the timing of line reviews you mentioned, you hopefully kind of next couple of months get a better sense of back-to-school for 2015, what is the timing for when these types of resets takes place?

They start pretty much right after the back-to-school ends in September and the process takes 2 or 3 months and sometimes it drags all the way to December. Typically we need to have decisions made in December because the quantity of product for back-to-school is so vast at many of the customers that we need the lead time to manufacture them. So, my expectation is that by the end of December we will know where we stand.

Okay. And then when you guys look at the cash flow here for debt reduction, I mean are there acquisition opportunities that you would add into the mix whether its tuck-in to kind of plug some holes in the portfolio or larger?

Yes, that’s absolutely the case. We have mentioned at several prior calls that acquisitions are a key part of our strategy that remains. They are serendipitous in nature. So, if we find an acquisition that makes sense for us, we will go certainly act on it. We have the cash in debt capacity to do that. But until that time as Neal mentioned, our priority is to pay down debt and also to return some cash back to our shareholders.

Thank you very much guys. I appreciate it.

Thank you.

Thank you for your question. Your next question comes from the line of Kevin Ziets from Citi. Please proceed.

Hi. Good morning.

Good morning.

Good morning, Kevin.

I guess my question is on pricing, it looks like in North America you have been able to take more price as the year has gone on. And I am curious if you could talk about how that’s I guess how you are getting that pricing power?

The pricing in North America comes from different places. U.S. pricing was actually a pretty small as a percent of sales. There were – as Neal mentioned, there were some programs benefits because we didn’t promote as much on some of the categories that we did prior year. And then, a lot of the pricing in North America as a percent was driven by Canada. We took some price in Canada both in January and in July as a result of the weakening Canadian dollar, so that had a major impact.

Okay. And you said that the fourth quarter is going to have a bigger impact from consolidation, is - but you said that it’s really not store closures necessarily that drive that. So, are there DCs that you are aware of that are consolidating or something…?

Yes. We are aware of a couple of DCs. But, typically, we find out after the fact when DCs are closed, our customers are fairly public about store closures and report that on a quarterly basis. They are less public about DC closures, so that comes through channel intelligence work that we have.

Okay. And that’s what’s driving your outlook for 4Q?

Yes. And then and just the fact that it’s going to be such a meaningful store closure number, in the first half of the year, the superstore closed around 100 stores in the U.S. We expect that number to double or triple in the second half and it will have an effect.

Okay. And just so I understand the – you said won three contracts and lost one. Are the three that you won incremental or is it business that you already had that you kept?

It’s marginally incremental. Its most of the business that we already had we are able to consolidate a couple of secondary in tertiary suppliers. So, there is a little bit of incremental volume, but most of it we already had.

Okay. And when you are winning, do you find you’re winning at sort of similar margin or similar price points?

It’s similar. I mean, typically, we have to give something to win for that, it’s a little bit of incremental volume, but it’s still in the best interest of our shareholders.

Sure. And when does, I guess, are there any other large contracts coming up this year or into early next year that you are aware of or are we through that….?

These things come up on an ongoing basis. We are dealing with professional buyers at very sophisticated companies. They keep us honest everyday. So, you should think of every quarter, every year these things are out a bit.

Fair enough. And then I just wanted to kind of get a sense of where you are in sort of readdressing the portfolio in Computer Products. I know, it sounds like some of the negative top line effects might be lessening. But where are you in terms of actually getting the more premium products out there. I think last quarter you said it retro tablet cases and things like that, how are those things doing?

Yes, we are in the early stages of executing our strategy of moving to a more value added in the Computer Products. We will have to do some work to balance our resources to make sure we can execute on that strategy. I expect that to take place over the next 12 months. But I do expect that the impact of the strategy will be felt as we execute through the year. And overall, as I mentioned, revenue will still be pressured, but I do expect the profit to be improved.

Right. But it sounds like not enough to significantly impact this Christmas for example?

No, no. As we discussed on the couple of previous calls, Computer Products is now roughly 8% of our revenue and maybe 7% of our operating income. One way or the other, up or down it’s not going to have a tremendously impactful performance on our overall enterprise. So, this is all it matters on the margin, but overall, it’s not a big deal either way.

Good point. My last question is on acquisitions, I know it’s been part of the strategy for a while and not much has been executed, I am sure that’s not for lack of looking at things. So, I am curious if you could give us a sense for maybe how many or what size transactions you are looking at and maybe not executing on?

I can’t really comment on that, you are right, if not for the lack of looking at stuff, but I just want to leave it at that.

Okay, thanks very much.

Thanks, Kevin.

Thank you for your questions. I would now like to turn the call over to Boris Elisman, President and CEO for closing remarks.

Thank you, Tracy. In closing, let me say, we had a great quarter. And despite the headwinds we faced on some of our geographies, our game plan for the fourth quarter remains the same. I look forward to reporting to you on those results in February. Thank you for joining us this morning. Have a good day.