UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



Form	10-Q



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~September 30, 2019~~March 31, 2020



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 001-08454

ACCO Brands Corporation

(Exact Name of Registrant as Specified in Its Charter)



Delaware	36-2704017
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

Four Corporate Drive

Lake Zurich, Illinois 60047

(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	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	ACCO	NYSE

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 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of ~~October 22, 2019,~~April 27, 2020, the registrant had outstanding ~~96,986,635~~94,462,147 shares of Common Stock.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, particularly those anticipating future financial performance, business prospects, growth, operating strategies and similar matters, including without limitation, statements concerning the impacts of the COVID-19 pandemic on the Company’s business, operations, results of operations, liquidity and financial condition, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management based on information available to us at the time such statements are made. These statements, which are generally identifiable by the use of the words "will," "believe," "expect," "intend," "anticipate," "estimate," "forecast," "project," "plan," and similar expressions, are subject to certain risks and uncertainties, are made as of the date hereof, and we undertake no duty or obligation to update them. Because actual results may differ materially from those suggested or implied by such forward-looking statements, you should not place undue reliance on them when deciding whether to buy, sell or hold the Company's securities.

~~Some~~Our outlook is based on certain assumptions, which we believe to be reasonable under the circumstances. These include, without limitation, assumptions regarding both the near-term and long-term impact of the COVID-19 pandemic on the global economy and other changes in the macro environment; changes in the competitive landscape, including ongoing uncertainties in the traditional office products channels; as well as the impact of fluctuations in foreign currency and acquisitions and the other factors described below.

Among the factors that could cause our actual results to differ materially from our forward-looking statements are: the scope and duration of the COVID-19 pandemic, government actions and other third party responses to it and the consequences for the global economy, uncertainties regarding how geographies, distribution channels and consumer behaviors will evolve over time in response to the pandemic, and its impact on our business, operations, results of operations and financial condition, including, among others, manufacturing, distribution and supply chain disruptions, reduced demand for our products and services, and the financial condition of our suppliers and customers, including their ability to fund their operations and pay their invoices. Additionally, many of the other risk factors affecting us are currently elevated by, and may continue to be elevated by, the COVID-19 pandemic.

Other factors that could affect our results or cause plans, actions and results to differ materially from current expectations are detailed in "Part I, Item 1. Business" and "Part I, Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, as updated under "Part II, Item 1A. Risk Factors" of this Quarterly Report on Form 10-Q, and the discussion under the heading "COVID-19 Impact" as well as the financial statement line item discussions set forth in "Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations" of this Quarterly Report on Form 10-Q and from time to time in our other Securities and Exchange Commission (the "SEC") filings.

Website Access to Securities and Exchange Commission Reports

The Company’s Internet website can be found at www.accobrands.com. The Company makes available free of charge on or through its website 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 or furnished 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, or furnishes them to, the SEC.

TABLE OF CONTENTS



PART I — FINANCIAL INFORMATION	4
Item 1. Financial Statements	4
Condensed Consolidated Balance Sheets	4
Consolidated Statements of ~~Income~~Operations	5
Consolidated Statements of Comprehensive ~~Income~~Loss	6
Condensed Consolidated Statements of Cash Flows	7
Consolidated Statement of Stockholders’ Equity	8
Notes to Condensed Consolidated Financial Statements	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3429
Item 3. Quantitative and Qualitative Disclosures About Market Risk	4638
Item 4. Controls and Procedures	4638
PART II — OTHER INFORMATION	4739
Item 1. Legal Proceedings	4739
Item 1A. Risk Factors	4739
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4741
Item 3. Defaults Upon Senior Securities	4741
Item 4. Mine Safety Disclosures	4841
Item 5. Other Information	4841
Item 6. Exhibits	4841
SIGNATURES	4943

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ACCO Brands Corporation and Subsidiaries

Condensed Consolidated Balance Sheets


	September 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
(in millions)	(unaudited)						(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	37.7		$	67.0		$	93.4		$	27.8
Accounts receivable, net	377.4			428.4			298.9			453.7
Inventories	312.5			340.6			291.6			283.3
Other current assets	45.3			44.2			54.1			41.2
Total current assets	772.9			880.2			738.0			806.0
Total property, plant and equipment	631.4			618.7			631.6			651.7
Less: accumulated depreciation	(372.0		)	(355.0		)	(381.0		)	(384.6		)
Property, plant and equipment, net	259.4			263.7			250.6			267.1
Right of use asset, leases	95.8			—			92.1			101.9
Deferred income taxes	105.0			115.1			109.2			119.0
Goodwill	709.7			708.9			717.7			718.6
Identifiable intangibles, net	756.8			787.0			725.9			758.6
Other non-current assets	22.5			31.5			19.7			17.4
Total assets	$	2,722.1		$	2,786.4		$	2,653.2		$	2,788.6
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable	$	3.6		$	—		$	15.7		$	3.7
Current portion of long-term debt	31.6			39.5			51.5			29.5
Accounts payable	175.7			274.6			185.9			245.7
Accrued compensation	46.1			41.6			28.3			48.5
Accrued customer program liabilities	89.2			114.5			64.2			99.7
Lease liabilities	20.6			—			19.9			21.8
Other current liabilities	110.8			129.0			104.0			139.9
Total current liabilities	477.6			599.2			469.5			588.8
Long-term debt, net	882.5			843.0			856.9			777.2
Long-term lease liabilities	84.6			11.0			81.7			89.8
Deferred income taxes	183.0			176.2			167.3			177.5
Pension and post-retirement benefit obligations	226.8			257.2			268.9			283.2
Other non-current liabilities	100.7			110.1			91.0			98.4
Total liabilities	1,955.2			1,996.7			1,935.3			2,014.9
Stockholders' equity:
Common stock	1.0			1.1			1.0			1.0
Treasury stock	(38.2		)	(33.9		)	(39.9		)	(38.2		)
Paid-in capital	1,893.8			1,941.0			1,874.3			1,890.8
Accumulated other comprehensive loss	(478.4		)	(461.7		)	(545.1		)	(505.7		)
Accumulated deficit	(611.3		)	(656.8		)	(572.4		)	(574.2		)
Total stockholders' equity	766.9			789.7			717.9			773.7
Total liabilities and stockholders' equity	$	2,722.1		$	2,786.4		$	2,653.2		$	2,788.6

See Notes to Condensed Consolidated Financial Statements (Unaudited).

ACCO Brands Corporation and Subsidiaries

Consolidated Statements of ~~Income~~Operations

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(in millions, except per share data)	2019			2018			2019			2018			2020			2019
Net sales	$	505.7		$	507.3		$	1,418.3		$	1,411.9		$	384.1		$	393.9
Cost of products sold	349.8			346.5			970.8			961.2			271.9			268.1
Gross profit	155.9			160.8			447.5			450.7			112.2			125.8
Operating costs and expenses:
Selling, general and administrative expenses	96.4			92.8			287.8			294.6			86.1			95.9
Amortization of intangibles	8.6			9.4			26.8			27.2			8.4			9.3
Restructuring charges	2.1			1.1			4.8			7.9			0.3			2.7
Total operating costs and expenses	107.1			103.3			319.4			329.7			94.8			107.9
Operating income	48.8			57.5			128.1			121.0			17.4			17.9
Non-operating expense (income):
Interest expense	11.5			11.6			33.6			30.9			8.6			10.4
Interest income	(0.7		)	(1.1		)	(2.9		)	(3.5		)	(0.3		)	(0.9		)
Non-operating pension income	(1.3		)	(2.6		)	(4.1		)	(7.1		)	(1.5		)	(1.4		)
Other (income) expense, net	(0.9		)	0.6			0.1			1.6
Other income, net													(0.5		)	(0.2		)
Income before income tax	40.2			49.0			101.4			99.1			11.1			10.0
Income tax expense	12.2			13.4			38.1			27.4			3.1			10.6
Net income	$	28.0		$	35.6		$	63.3		$	71.7
Net income (loss)													$	8.0		$	(0.6	)

Per share:
Basic income per share	$	0.29		$	0.34		$	0.63		$	0.68
Diluted income per share	$	0.28		$	0.34		$	0.62		$	0.66
Basic income (loss) per share													$	0.08		$	(0.01	)
Diluted income (loss) per share													$	0.08		$	(0.01	)

Weighted average number of shares outstanding:
Basic	97.6			103.8			100.4			105.6			96.0			102.3
Diluted	98.9			105.9			101.9			107.9			97.5			102.3

See Notes to Condensed Consolidated Financial Statements (Unaudited).

ACCO Brands Corporation and Subsidiaries

Consolidated Statements of Comprehensive ~~Income~~Loss

(Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2019 2018 2019 2018
Net income $ 28.0
$ 35.6
$ 63.3
$ 71.7
Other comprehensive income (loss), net of tax:
Unrealized income (loss) on derivative instruments, net of tax (expense) benefit of $(0.6) and $0.3 and $0.4 and $(1.1), respectively 1.4
(0.7 ) (0.9 ) 2.8

Foreign currency translation adjustments, net of tax benefit (expense) of $0.9 and $1.2 and $0.5 and $(1.6), respectively (25.1 ) (4.5 ) (22.4 ) (18.6 )

Recognition of deferred pension and other post-retirement items, net of tax (expense) of $(1.2) and $(0.4) and $(1.9) and $(1.9), respectively 4.2
1.1
6.6
6.2
Other comprehensive loss, net of tax (19.5 ) (4.1 ) (16.7 ) (9.6 )

Comprehensive income $ 8.5
$ 31.5
$ 46.6
$ 62.1



	Three Months Ended March 31,
(in millions)	2020			2019
Net income (loss)	$	8.0		$	(0.6	)
Other comprehensive income (loss), net of tax:
Unrealized income (loss) on derivative instruments, net of tax (expense) benefit of $(0.9) and $0.4, respectively	2.4			(1.1		)

Foreign currency translation adjustments, net of tax benefit (expense) of $2.1 and $(3.8), respectively	(49.7		)	(3.1		)

Recognition of deferred pension and other post-retirement items, net of tax (expense) benefit of $(2.4) and $0.4, respectively	7.9			(1.1		)
Other comprehensive loss, net of tax	(39.4		)	(5.3		)

Comprehensive loss	$	(31.4	)	$	(5.9	)

See Notes to Condensed Consolidated Financial Statements (Unaudited).

ACCO Brands Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended September 30,						Three Months Ended March 31,
(in millions)	2019			2018			2020			2019
Operating activities
Net income	$	63.3		$	71.7
Net income (loss)							$	8.0		$	(0.6	)
Amortization of inventory step-up	0.2			—			—			0.1
Loss on disposal of assets	—			0.1			—			0.1
Depreciation	26.3			25.5			8.6			8.8
Other non-cash items	0.2			—
Amortization of debt issuance costs	1.7			1.5			0.5			0.5
Amortization of intangibles	26.8			27.2			8.4			9.3
Stock-based compensation	6.3			6.0			0.9			2.0
Loss on debt extinguishment	0.3			0.3
Changes in balance sheet items:
Accounts receivable	54.0			46.2			112.0			108.1
Inventories	34.8			(81.2		)	(26.2		)	(57.3		)
Other assets	(2.6		)	(0.6		)	(13.8		)	(10.1		)
Accounts payable	(102.1		)	39.1			(45.2		)	(79.9		)
Accrued expenses and other liabilities	(40.8		)	(58.1		)	(72.1		)	(41.1		)
Accrued income taxes	6.7			7.0			(6.3		)	(1.2		)
Net cash provided by operating activities	75.1			84.7
Net cash used by operating activities							(25.2		)	(61.3		)
Investing activities
Additions to property, plant and equipment	(21.9		)	(26.3		)	(6.9		)	(7.2		)
Proceeds from the disposition of assets	0.1			0.2			—			0.1
Cost of acquisitions, net of cash acquired	(42.1		)	(37.3		)	0.6			—
Other assets acquired	(5.2		)	—			—			(5.4		)
Net cash used by investing activities	(69.1		)	(63.4		)	(6.3		)	(12.5		)
Financing activities
Proceeds from long-term borrowings	325.9			217.4			117.4			123.7
Repayments of long-term debt	(272.0		)	(118.3		)	(5.3		)	—
Repayments of notes payable, net	(8.6		)	—
Payments for debt issuance costs	(3.3		)	(0.6		)
Borrowings of notes payable, net							12.4			4.8
Dividends paid	(18.1		)	(18.9		)	(6.2		)	(6.2		)
Repurchases of common stock	(56.8		)	(75.0		)	(18.9		)	(10.5		)
Payments related to tax withholding for stock-based compensation	(4.3		)	(7.5		)	(1.7		)	(4.2		)
Proceeds from the exercise of stock options	3.1			6.8			1.5			—
Net cash (used) provided by financing activities	(34.1		)	3.9
Net cash provided by financing activities							99.2			107.6
Effect of foreign exchange rate changes on cash and cash equivalents	(1.2		)	(7.1		)	(2.1		)	(0.3		)
Net (decrease) increase in cash and cash equivalents	(29.3		)	18.1
Net increase in cash and cash equivalents							65.6			33.5
Cash and cash equivalents
Beginning of the period	67.0			76.9			27.8			67.0
End of the period	$	37.7		$	95.0		$	93.4		$	100.5
Cash paid during the year for:
Interest	$	27.6		$	22.8		$	2.9		$	4.3
Income taxes	$	38.6		$	24.5		$	10.1		$	11.4

See Notes to Condensed Consolidated Financial Statements (Unaudited).

ACCO Brands Corporation and Subsidiaries

Consolidated Statement of Stockholders' Equity

(Unaudited)


(in millions)	Common Stock			Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Accumulated Deficit			Total			Common Stock		Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Accumulated Deficit			Total
Balance at December 31, 2018	$	1.1		$	1,941.0		$	(461.7	)	$	(33.9	)	$	(656.8	)	$	789.7
Net loss	—			—			—			—			(0.6		)	(0.6		)
Loss on derivative financial instruments, net of tax	—			—			(1.1		)	—			—			(1.1		)
Translation impact	—			—			(3.1		)	—			—			(3.1		)
Pension and post-retirement adjustment, net of tax	—			—			(1.1		)	—			—			(1.1		)
Common stock repurchases	—			(11.0		)	—			—			—			(11.0		)
Stock-based compensation	—			2.0			—			—			—			2.0
Common stock issued, net of shares withheld for employee taxes	—			—			—			(4.3		)	—			(4.3		)
Dividends declared, $.06 per share	—			—			—			—			(6.2		)	(6.2		)
Other	—			(0.1		)	—			—			0.1			—
Cumulative effect due to the adoption of ASU 2016-02	—			—			—			—			0.5			0.5
Balance at March 31, 2019	1.1			1,931.9			(467.0		)	(38.2		)	(663.0		)	764.8
Net income	—			—			—			—			35.9			35.9
Loss on derivative financial instruments, net of tax	—			—			(1.2		)	—			—			(1.2		)
Translation impact	—			—			5.8			—			—			5.8
Pension and post-retirement adjustment, net of tax	—			—			3.5			—			—			3.5
Common stock repurchases	—			(28.3		)	—			—			—			(28.3		)
Stock-based compensation	—			3.6			—			—			(0.2		)	3.4
Common stock issued, net of shares withheld for employee taxes	—			0.2			—			—			—			0.2
Dividends declared, $.06 per share	—			—			—			—			(6.0		)	(6.0		)
Other	(0.1		)	0.1			—			—			(0.1		)	(0.1		)
Balance at June 30, 2019	1.0			1,907.5			(458.9		)	(38.2		)	(633.4		)	778.0
Balance at December 31, 2019																			$	1.0	$	1,890.8		$	(505.7	)	$	(38.2	)	$	(574.2	)	$	773.7
Net income	—			—			—			—			28.0			28.0			—		—			—			—			8.0			8.0
Gain on derivative financial instruments, net of tax	—			—			1.4			—			—			1.4			—		—			2.4			—			—			2.4
Translation impact	—			—			(25.1		)	—			—			(25.1		)	—		—			(49.7		)	—			—			(49.7		)
Pension and post-retirement adjustment, net of tax	—			—			4.2			—			—			4.2			—		—			7.9			—			—			7.9
Common stock repurchases	(0.1		)	(17.6		)	—			—			—			(17.7		)	—		(18.9		)	—			—			—			(18.9		)
Stock-based compensation	—			1.0			—			—			(0.1		)	0.9			—		0.9			—			—			—			0.9
Common stock issued, net of shares withheld for employee taxes	—			2.9			—			—			—			2.9			—		1.5			—			(1.7		)	—			(0.2		)
Dividends declared, $.06 per share	—			—			—			—			(5.9		)	(5.9		)
Other	0.1			—			—			—			0.1			0.2
Balance at September 30, 2019	$	1.0		$	1,893.8		$	(478.4	)	$	(38.2	)	$	(611.3	)	766.9
Dividends declared, $.065 per share																			—		—			—			—			(6.2		)	(6.2		)
Balance at March 31, 2020																			$	1.0	$	1,874.3		$	(545.1	)	$	(39.9	)	$	(572.4	)	$	717.9

Shares of Capital Stock


	Common Stock		Treasury Stock	Net Shares		Common Stock		Treasury Stock	Net Shares
Shares at December 31, 2018	106,249,322		3,500,622	102,748,700
Shares at December 31, 2019						100,412,933		3,967,445	96,445,488
Common stock issued, net of shares withheld for employee taxes	1,437,021		458,987	978,034		898,664		206,243	692,421
Common stock repurchases	(1,260,163	)	—	(1,260,163	)	(2,690,292	)	—	(2,690,292	)
Shares at March 31, 2019	106,426,180		3,959,609	102,466,571
Common stock issued, net of shares withheld for employee taxes	44,180		7,836	36,344
Common stock repurchases	(3,443,904	)	—	(3,443,904	)
Shares at June 30, 2019	103,026,456		3,967,445	99,059,011
Common stock issued, net of shares withheld for employee taxes	386,781		—	386,781
Common stock repurchases	(2,258,645	)	—	(2,258,645	)
Shares at September 30, 2019	101,154,592		3,967,445	97,187,147
Shares at March 31, 2020						98,621,305		4,173,688	94,447,617

See Notes to Condensed Consolidated Financial Statements (Unaudited).

ACCO Brands Corporation and Subsidiaries

Consolidated Statement of Stockholders' Equity

Continued (Unaudited)


(in millions)	Common Stock		Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Accumulated Deficit			Total			Common Stock		Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Accumulated Deficit			Total
Balance at December 31, 2017	$	1.1	$	1,999.7		$	(461.1	)	$	(26.4	)	$	(739.2	)	$	774.1
Net income	—		—			—			—			10.4			10.4
Gain on derivative financial instruments, net of tax	—		—			0.6			—			—			0.6
Translation impact	—		—			(4.3		)	—			—			(4.3		)
Pension and post-retirement adjustment, net of tax	—		—			(2.6		)	—			—			(2.6		)
Common stock repurchases	—		(9.3		)	—			—			—			(9.3		)
Stock-based compensation	—		3.5			—			—			(0.3		)	3.2
Common stock issued, net of shares withheld for employee taxes	—		5.2			—			(7.5		)	—			(2.3		)
Dividends declared, $.06 per share	—		—			—			—			(6.3		)	(6.3		)
Cumulative effect due to the adoption of ASU 2014-09	—		—			—			—			1.5			1.5
Balance at March 31, 2018	1.1		1,999.1			(467.4		)	(33.9		)	(733.9		)	765.0
Net income	—		—			—			—			25.7			25.7
Gain on derivative financial instruments, net of tax	—		—			2.9			—			—			2.9
Translation impact	—		—			(9.8		)	—			—			(9.8		)
Pension and post-retirement adjustment, net of tax	—		—			7.7			—			—			7.7
Common stock repurchases	—		(41.7		)	—			—			—			(41.7		)
Stock-based compensation	—		4.1			—			—			(0.2		)	3.9
Common stock issued, net of shares withheld for employee taxes	—		1.0			—			—			—			1.0
Dividends declared, $.06 per share	—		—			—			—			(6.4		)	(6.4		)
Balance at June 30, 2018	1.1		1,962.5			(466.6		)	(33.9		)	(714.8		)	748.3
Net income	—		—			—			—			35.6			35.6
December 31, 2018																		$	1.1	$	1,941.0		$	(461.7	)	$	(33.9	)	$	(656.8	)	$	789.7
Net loss																		—		—			—			—			(0.6		)	(0.6		)
Loss on derivative financial instruments, net of tax	—		—			(0.7		)	—			—			(0.7		)	—		—			(1.1		)	—			—			(1.1		)
Translation impact	—		—			(4.5		)	—			—			(4.5		)	—		—			(3.1		)	—			—			(3.1		)
Pension and post-retirement adjustment, net of tax	—		—			1.1			—			—			1.1			—		—			(1.1		)	—			—			(1.1		)
Common stock repurchases	—		(24.0		)	—			—			—			(24.0		)	—		(11.0		)	—			—			—			(11.0		)
Stock-based compensation	—		(0.9		)	—			—			(0.2		)	(1.1		)	—		2.0			—			—			—			2.0
Common stock issued, net of shares withheld for employee taxes	—		0.5			—			—			—			0.5			—		—			—			(4.3		)	—			(4.3		)
Dividends declared, $.06 per share	—		—			—			—			(6.2		)	(6.2		)	—		—			—			—			(6.2		)	(6.2		)
Other	—		0.1			—			—			—			0.1			—		(0.1		)	—			—			0.1			—
Balance at September 30, 2018	$	1.1	$	1,938.2		$	(470.7	)	$	(33.9	)	$	(685.6	)	$	749.1
Cumulative effect due to the adoption of ASU 2016-02																		—		—			—			—			0.5			0.5
Balance at March 31, 2019																		$	1.1	$	1,931.9		$	(467.0	)	$	(38.2	)	$	(663.0	)	$	764.8

Shares of Capital Stock


	Common Stock		Treasury Stock	Net Shares		Common Stock		Treasury Stock	Net Shares
Shares at December 31, 2017	109,597,197		2,913,113	106,684,084
Shares at December 31, 2018						106,249,322		3,500,622	102,748,700
Common stock issued, net of shares withheld for employee taxes	2,442,703		580,755	1,861,948		1,437,021		458,987	978,034
Common stock repurchases	(760,473	)	—	(760,473	)	(1,260,163	)	—	(1,260,163	)
Shares at March 31, 2018	111,279,427		3,493,868	107,785,559
Common stock issued, net of shares withheld for employee taxes	115,620		1,933	113,687
Common stock repurchases	(3,272,480	)	—	(3,272,480	)
Shares at June 30, 2018	108,122,567		3,495,801	104,626,766
Common stock issued, net of shares withheld for employee taxes	75,171		1,286	73,885
Common stock repurchases	(1,961,006	)	—	(1,961,006	)
Shares at September 30, 2018	106,236,732		3,497,087	102,739,645
Shares at March 31, 2019						106,426,180		3,959,609	102,466,571

See Notes to Condensed Consolidated Financial Statements (Unaudited).

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Basis of Presentation

As used in this Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2019~~March 31, 2020, the terms "ACCO Brands," "ACCO," the "Company," "we," "us," and "our" refer to ACCO Brands Corporation and its consolidated subsidiaries.

The management of ACCO Brands Corporation is responsible for the accuracy and internal consistency of the preparation of the condensed consolidated financial statements and notes contained in this Quarterly Report on Form 10-Q.

The condensed consolidated interim financial statements have been prepared pursuant to the rules and regulations of the SEC. Although the Company believes the disclosures are adequate to make the information presented not misleading, certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles in the U.S. ("GAAP") have been condensed or omitted pursuant to those rules and regulations. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019.

The Condensed Consolidated Balance Sheet as of ~~September 30, 2019,~~March 31, 2020, the related Consolidated Statements of ~~Income,~~Operations, the Consolidated Statements of Comprehensive ~~Income,~~Loss, and the Consolidated Statement of Stockholders' Equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ and Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ are unaudited. The December 31, ~~2018~~2019 Condensed Consolidated Balance Sheet data was derived from audited financial statements, but does not include all annual disclosures required by GAAP. The above referenced financial statements included herein were prepared by management and reflect all adjustments (consisting solely of normal recurring items unless otherwise noted) which are, in the opinion of management, necessary for the fair presentation of results of operations and cash flows for the interim periods ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ and the financial position of the Company as of ~~September 30, 2019.~~March 31, 2020. Interim results may not be indicative of results for a full year.

Effective August 1, 2019, we completed the acquisition (the "Foroni Acquisition") of Indústria Gráfica Foroni Ltda. ("Foroni"), a leading provider of Foroni^®branded notebooks and paper-based school and office products in ~~Brazil, for a preliminary~~Brazil. The purchase price ~~of $42.1~~was $41.5 million ~~subject to~~inclusive of working capital ~~and other~~ adjustments. The Foroni Acquisition ~~advances~~advanced our strategy to expand in faster growing geographies and product categories, add consumer-centric brands and diversify our customer base. The results of Foroni are included in the ACCO Brands International segment ~~from~~effective August 1, 2019.

~~On July 2, 2018, we completed the acquisition (the "GOBA Acquisition") of GOBA Internacional, S.A. de C.V. ("GOBA"), a leading provider of Barrilito~~^®~~branded school and craft products in Mexico. The purchase price was~~ $37.2 million, net of cash acquired, and working capital and other adjustments. The GOBA Acquisition has increased the breadth and depth of our distribution throughout Mexico, especially with wholesalers and retailers and added a strong offering of school and craft products to our product portfolio in Mexico. The results of GOBA are included in the ACCO Brands International segment from July 2, 2018.

See "Note 3. Acquisitions" for details on the Foroni ~~and GOBA acquisitions.~~

Certain prior year amounts have been reclassified for consistency with the current year presentation in our Condensed Consolidated Balance Sheet, primarily due to the Company's adoption of ASU No. 2016-02, Leases (Topic 842) at the beginning of 2019.acquisition.

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting periods. Actual results could differ from those estimates.

~~ACCO Brands Corporation and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~

2. Recent Accounting Pronouncements and Adopted Accounting Standards

Recent Accounting Pronouncements

In ~~August 2018,~~December 2019, the Financial Accounting Standards Board ~~(the "FASB"~~("FASB") issued ASU ~~No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40),~~ ~~Customer’s~~2019-12, Income Taxes (Topic 740): Simplifying the Accounting for ~~Implementation Costs Incurred~~Income Taxes, which removes certain exceptions for investments, intraperiod allocations and interim calculations, and adds guidance to reduce complexity in ~~a Cloud Computing Arrangement That Is a Service Contract. This~~accounting for income taxes. ASU ~~aligns~~2019-12 is effective for annual periods, and interim periods within those years, beginning after December 15, 2020. The Company is currently evaluating the ~~requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with~~effects the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). While the Company does not expect a material impact tostandard will have on its consolidated financial statements, we are currently in the process of evaluating the adoption of ASU 2018-15. ASU 2018-015 is effective for fiscal years ending after December 15, 2019. Early adoption of the standard is permitted, including adoption in any interim period for which financial statements have not been issued. The Company will adopt ASU No. 2018-15 beginning January 1, 2020.statements.

There are no other recently issued accounting standards that are expected to have an impact on the Company’s financial condition, results of operations or cash flow.

Recently Adopted Accounting Standards

~~On January 1, 2019,~~In June 2016, the ~~Company adopted~~FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, an accounting standard ~~ASU No. 2016-02, Leases (Topic 842), applying the transition method in~~that requires companies to utilize an impairment model (current expected credit loss, or "CECL") for most financial assets measured at amortized cost and certain other financial instruments, which include, but are not limited to, trade and other receivables. This accounting standard ~~ASU 2018-11 Leases (Topic 842), Targeted Improvements. ASU 2018-11 allows an entity to initially apply ASU 2016-02 at~~replaced the ~~adoption date and recognize~~incurred loss model with a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

~~The cumulative effect of the changes on our January 1, 2019, opening Condensed Consolidated Balance Sheet due to the adoption of ASU 2016-02 was as follows:~~

(in millions) Balance at December 31, 2018 Adjustments due to ASU 2016-02 Balance at January 1, 2019
Assets:
Property, plant and equipment, net $ 263.7
$ (0.9 ) $ 262.8
Right of use asset, leases —
90.9
90.9

Liabilities and stockholders' equity:
Current portion of long-term debt 39.5
(0.1 ) 39.4
Lease liabilities —
24.1
24.1
Long-term debt, net 843.0
(0.1 ) 842.9
Long-term lease liabilities 11.0
65.6
76.6
Accumulated deficit (656.8 ) 0.5
(656.3 )

model that

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

~~The impact~~reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate those losses. Effective January 1, 2020, the Company adopted this standard. As of March 31, 2020 the adoption of ~~ASU 2016-02~~this standard did not have a material impact on our ~~Condensed Consolidated Balance Sheet for the period ended September 30, 2019 was as follows:~~

Balance at September 30, 2019
(in millions) As Reported Balances without adoption of ASU 2016-02 Effect of Change Higher/(Lower)
Condensed Consolidated Balance Sheet:
Assets:
Property, plant and equipment, net $ 259.4
$ 260.2
$ (0.8 )
Right of use asset, leases 95.8
—
95.8

Liabilities and stockholders' equity:
Current portion of long-term debt 31.6
31.7
(0.1 )
Lease liabilities 20.6
0.3
20.3
Long-term debt, net 882.5
882.6
(0.1 )
Long-term lease liabilities 84.6
10.2
74.4
Accumulated deficit (611.3 ) (611.8 ) 0.5

~~See "Note 5. Leases" for further details and the required disclosures related to ASU 2016-02.~~

~~The adoption of ASU 2016-02 did not materially affect our Consolidated Statements of Income, Condensed Consolidated Statements of Cash Flows or Consolidated Statement of Stockholders' Equity.~~condensed consolidated financial statements.

There were no other accounting standards that were adopted in the first ~~nine~~three months of ~~2019~~2020 that had a material effect on the Company’s financial condition, results of operations or cash flow.

3. Acquisitions

Acquisition of Foroni

Effective August 1, 2019, we completed the acquisition of Foroni, a leading provider of Foroni^®branded notebooks and paper-based school and office products in Brazil. The Foroni Acquisition ~~advances~~advanced our strategy to expand in faster growing geographies and product categories, add consumer-centric brands and diversify our customer base. The results of Foroni are included in the ACCO Brands International segment ~~from~~effective August 1, 2019.

The ~~preliminary~~ purchase price was R$~~159.5~~157.2 million (US$~~42.1~~41.5 million based on July 31, 2019, exchange rates) ~~subject to~~inclusive of working capital ~~and other adjustments and includes the assumption of~~adjustments. We also assumed $7.6 million in debt. A portion of the purchase price (R$25.0 million or US$6.6 million based on July 31, 2019 exchange rates) is being held in an escrow account for a period of up to 6 years after closing in the event of any claims against the sellers under the quota purchase agreement. The Company may also make claims against the sellers directly, subject to limitations in the quota purchase agreement, if the escrow is depleted. The Foroni Acquisition and related expenses were funded by cash on hand.

For accounting purposes, the Company was the acquiring enterprise. The Foroni Acquisition is being accounted for as a purchase business combination and Foroni's results are included in the Company’s condensed consolidated financial statements as of August 1, 2019. The net sales for Foroni for ~~each of~~ the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 were ~~$5.7 million for the two months owned.~~$14.4 million.

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

The following table presents the preliminary allocation of the consideration given to the fair values of the assets acquired and liabilities assumed at the date of acquisition:



(in millions)	At August 1, 2019
Calculation of Goodwill:
Purchase price, net of working capital adjustment	$	41.5

Plus fair value of liabilities assumed:
Accounts payable and accrued liabilities	12.4
Deferred tax liabilities	3.9
Debt	7.6
Lease liabilities	5.6
Fair value of liabilities assumed	$	29.5

Less fair value of assets acquired:
Cash acquired	—
Accounts receivable	17.5
Inventory	12.2
Property and equipment	9.1
Identifiable intangibles	11.1
Deferred tax assets	2.6
Right of use asset, leases	5.6
Other assets	3.6
Fair value of assets acquired	$	61.7

Goodwill	$	9.3

(in millions) At August 2, 2019
Calculation of Goodwill:
Purchase price, net of working capital adjustment $ 42.1

Plus fair value of liabilities assumed:
Accounts payable and accrued liabilities 12.1
Deferred tax liabilities 5.2
Debt 7.6
Lease liabilities 4.8
Fair value of liabilities assumed $ 29.7

Less fair value of assets acquired:
Cash acquired —
Accounts receivable 17.5
Inventory 12.6
Property and equipment 8.9
Identifiable intangibles 10.2
Deferred tax assets 2.2
Right of use asset, leases 4.8
Other assets 3.7
Fair value of assets acquired $ 59.9

Goodwill $ 11.9

We are continuing our review of our fair value estimate of assets acquired and liabilities assumed during the measurement period, which will conclude as soon 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 not available. This measurement period will not exceed one year from the acquisition date. The excess of the purchase price over the fair value of net assets acquired is allocated to goodwill. The preliminary goodwill of ~~$11.9~~$9.3 million is primarily attributable to synergies expected to be realized from facility integration, headcount reduction and other operational streamlining activities, and from the existence of an assembled workforce.

Our fair value estimate of assets acquired and liabilities assumed is pending the completion of several elements, including ~~the final determination of the purchase price, pending calculations of working capital and other adjustments, of~~ the fair value of the assets acquired and liabilities assumed and the final review by our management. The primary areas that are not yet finalized relate to inventory, intangible assets, property and equipment, reserves and liabilities, and income and other taxes. Accordingly, there could be material adjustments to our condensed consolidated financial statements, including changes in our amortization and depreciation expense related to the valuation of intangible assets and property and equipment acquired and their respective useful lives, among other adjustments.

The final determination of the purchase price, fair values and resulting goodwill may differ significantly from what is reflected in these condensed consolidated financial statements.

During the ~~nine months~~year ended ~~September 30,~~December 31, 2019, transaction costs related to the Foroni Acquisition were ~~$1.3~~$1.5 million, and for the quarter ending March 31, 2020, they were $0.2 million. These costs were reported as selling, general and administrative ("SG&A") expenses in the Company's Consolidated Statements of ~~Income.~~

~~Pro forma financial information is not presented due to immateriality.~~

~~ACCO Brands Corporation and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~

~~Cumberland Asset Acquisition~~

On January 31, 2019, the Company completed the purchase of certain assets, including inventory and certain identifiable intangibles, for the Cumberland brand (the "Cumberland Asset Acquisition") in Australia for a purchase price of A$8.2 million (US$6.0 million based on January 31, 2019 exchange rates). The Cumberland Asset Acquisition extends our presence in Australia into new product categories. The Company accounted for the transaction as an asset acquisition, as the set of assets acquired does not meet the criteria to be classified as a business under GAAP. During the nine months ended September 30, 2019, transaction costs related to the Cumberland Asset Acquisition were $0.1 million. These costs were reported as SG&A expenses in the Company's Consolidated Statements of Income.

~~The following table summarizes the fair value of assets acquired:~~

(in millions) At January 31, 2019
Inventory $ 2.8
Identifiable intangibles 3.2
Fair value of assets acquired $ 6.0

~~Acquisition of GOBA~~

~~On July 2, 2018, the Company completed the GOBA Acquisition. GOBA is a leading provider of Barrilito~~^®branded school and craft products in Mexico. The GOBA Acquisition increased the breadth and depth of our distribution throughout Mexico, especially with wholesalers and retailers and added a strong offering of school and craft products to our product portfolio in Mexico.

The purchase price paid at closing was Mex$796.8 million (US$39.9 million based on July 2, 2018 exchange rates), and was later reduced by $0.8 million of working capital adjustments. The purchase price, net of cash acquired of $1.9 million, was $37.2 million. A portion of the purchase price (Mex$115.0 million (US$5.8 million based on July 2, 2018 exchange rates)) is being held in an escrow account for a period of up to 5 years after closing in the event of any claims against the sellers under the stock purchase agreement. The Company may also make claims against the sellers directly, subject to limitations in the stock purchase agreement, if the escrow is depleted. The GOBA Acquisition and related expenses were funded by increased borrowing under our revolving facility.

For accounting purposes, the Company was the acquiring enterprise. The GOBA Acquisition was accounted for as a purchase business combination. The results of GOBA are included in the ACCO Brands International segment as of July 2, 2018. The net sales for the six month period ended June 30, 2019 for GOBA were $23.7 million.

~~ACCO Brands Corporation and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~

~~The following table presents the allocation of the consideration given to the fair values of the assets acquired and liabilities assumed at the date of acquisition.~~

(in millions) At July 2, 2018
Calculation of Goodwill:
Purchase price, net of working capital adjustment $ 39.1

Plus fair value of liabilities assumed:
Accounts payable and accrued liabilities 10.1
Deferred tax liabilities 3.1
Other non-current liabilities 6.5
Fair value of liabilities assumed $ 19.7

Less fair value of assets acquired:
Cash acquired 1.9
Accounts receivable 30.0
Inventory 7.1
Property, plant and equipment 0.6
Identifiable intangibles 10.3
Deferred tax assets 2.0
Other assets 4.2
Fair value of assets acquired $ 56.1

Goodwill $ 2.7

~~In the second quarter of 2019, we finalized our fair value estimate of assets acquired and liabilities assumed as of the acquisition date.~~

During the year ended December 31, 2018, transaction costs related to the GOBA Acquisition were $1.1 million. These costs were reported as interest and SG&A expenses in the Company's Consolidated Statements of Income.Operations.

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

4. Long-term Debt and Short-term Borrowings

Notes payable and long-term debt, listed in order of the priority of security interests in assets of the Company, consisted of the following as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019:

(in millions) September 30,
2019 December 31,
2018
Euro Senior Secured Term Loan A, due May 2024 (floating interest rate of 1.75% at September 30, 2019) $ 273.0
$ —
Euro Senior Secured Term Loan A, due January 2022 (floating interest rate of 1.50% at December 31, 2018) —
289.0
USD Senior Secured Term Loan A, due May 2024 (floating interest rate of 3.94% at September 30, 2019) 98.7
—
Australian Dollar Senior Secured Term Loan A, due May 2024 (floating interest rate of 2.76% at September 30, 2019) 40.8
—
Australian Dollar Senior Secured Term Loan A, due January 2022 (floating interest rate of 3.56% at December 31, 2018) —
43.0
U.S. Dollar Senior Secured Revolving Credit Facility, due May 2024 (floating interest rate of 3.94% at September 30, 2019) 64.7
—
U.S. Dollar Senior Secured Revolving Credit Facility, due January 2022 (floating interest rate of 4.36% at December 31, 2018) —
106.8
Australian Dollar Senior Secured Revolving Credit Facility, due May 2024 (floating interest rate of 2.78% at September 30, 2019) 67.7
—
Australian Dollar Senior Secured Revolving Credit Facility, due January 2022 (floating interest rate of 3.54% at December 31, 2018) —
73.9
Senior Unsecured Notes, due December 2024 (fixed interest rate of 5.25%) 375.0
375.0
Other borrowings 3.6
0.3
Total debt 923.5
888.0
Less:
Current portion 35.2
39.5
Debt issuance costs, unamortized 5.8
5.5
Long-term debt, net $ 882.5
$ 843.0



(in millions)	March 31, 2020		December 31, 2019
Euro Senior Secured Term Loan A, due May 2024 (floating interest rate of 1.50% at March 31, 2020 and 1.50% at December 31, 2019)	$	268.7	$	275.9
USD Senior Secured Term Loan A, due May 2024 (floating interest rate of 2.57% at March 31, 2020 and 3.44% at December 31, 2019)	96.2		97.5
Australian Dollar Senior Secured Term Loan A, due May 2024 (floating interest rate of 2.20% at March 31, 2020 and 2.45% at December 31, 2019)	36.2		41.6
U.S. Dollar Senior Secured Revolving Credit Facility, due May 2024 (floating interest rate of 2.40% at March 31, 2020 and 3.26% at December 31, 2019)	120.7		8.2
Australian Dollar Senior Secured Revolving Credit Facility, due May 2024 (floating interest rate of 1.98% at March 31, 2020 and 2.44% at December 31, 2019)	16.7		14.0
Senior Unsecured Notes, due December 2024 (fixed interest rate of 5.25%)	375.0		375.0
Other borrowings	15.7		3.8
Total debt	929.2		816.0
Less:
Current portion	67.2		33.2
Debt issuance costs, unamortized	5.1		5.6
Long-term debt, net	$	856.9	$	777.2

The Company entered into a Third Amended and Restated Credit Agreement (the "Credit Agreement"), dated as of January 27, 2017, among the Company, certain subsidiaries of the Company, Bank of America, N.A., as administrative agent, and the other agents and various lenders party thereto. The Credit Agreement provided for a five-year senior secured credit facility, which consisted of a €300.0 million (US$320.8 million based on January 27, 2017, exchange rates) term loan facility, an A$80.0 million (US$60.4 million based on January 27, 2017, exchange rates) term loan facility, and a US$400.0 million multi-currency revolving credit facility (the "Revolving Facility").

Effective July 26, 2018, the Company entered into the First Amendment (the "First Amendment") to the Credit Agreement among the Company, certain subsidiaries of the Company, Bank of America, N.A., as administrative agent, and the other lenders party thereto. The First Amendment increased the aggregate revolving credit commitments under the Revolving Facility by $100.0 million such that, after giving effect to such increase, the aggregate amount of revolving credit available under the Revolving Facility was $500.0 million. In addition, the First Amendment also affected certain technical amendments to the Credit Agreement, including the addition of provisions relating to LIBOR successor rate procedures if LIBOR becomes unascertainable or is discontinued in the future and to expressly permit certain intercompany asset transfers. The changes related to LIBOR successor rate procedures are not expected to have a material effect on the Company.

Effective May 23, 2019, the Company entered into a Second Amendment (the "Second Amendment") to the Credit Agreement. Pursuant to the Second Amendment, the Credit Agreement was amended to, among other things:

extend the maturity date to May 23, 2024;

~~ACCO Brands Corporation and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~

increase the aggregate revolving credit commitments under the Revolving Facility from $500.0 million to $600.0 million;

establish a new term loan facility denominated in U.S. Dollars in an aggregate principal amount of $100.0 million (the "USD Term Loan");

replace the minimum fixed coverage ratio of 1.25:1.00 with a minimum interest coverage ratio, as calculated under the Credit Agreement, of 3.00:1.00;

reflect a more favorable restricted payment covenant, with the consolidated leverage ratio hurdle for unlimited restricted

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

payments (including share repurchases and dividends) as calculated under the Credit Agreement increasing from 2.50x to 3.25x;

reflect, in certain cases, more favorable pricing with a 25 basis point reduction in the applicable rate on outstanding loans than was in effect prior to the Second Amendment based on the Company's current consolidated leverage ratio, along with lower fees on undrawn amounts;

eliminate the requirement to make annual principal prepayments of excess cash flow;

reduce amortization payments for the term loans; and

increase the qualified receivables transaction basket with respect to sales or financings of certain receivables.

Effective upon the closing of the Second Amendment, the Company borrowed the entire principal amount committed under the USD Term Loan, which was used to repay revolver borrowings and, in combination with the increase in the Revolving Facility, resulted in $200.0 million of additional liquidity becoming available under the Revolving Facility.

~~We incurred and capitalized approximately $3.3 million in bank, legal and other fees associated with the Second Amendment.~~

As of ~~September 30, 2019,~~March 31, 2020, there were ~~$132.4~~$137.4 million in borrowings outstanding under the Revolving Facility. The remaining amount available for borrowings ~~as of September 30, 2019,~~ was ~~$454.8~~$450.1 million (allowing for ~~$12.8~~$12.5 million of letters of credit outstanding on that date).

As of and for the periods ended ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the Company was in compliance with all applicable loan covenants.

5. Leases

On January 1, 2019, the Company adopted accounting standard ASU No. 2016-02, Leases (Topic 842), applying the transition method in accounting standard ASU 2018-11 Leases (Topic 842), Targeted Improvements. ASU 2018-11 allows an entity to initially apply ASU 2016-02 at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company recorded a net increase to beginning retained earnings of $0.5 million as of January 1, 2019 due to the cumulative impact of adopting ASU 2016-02. The impact of adopting ASU 2016-02 on our Condensed Consolidated Balance Sheet was material, but the impact was immaterial for our Consolidated Statements of Income, Condensed Consolidated Statements of Cash Flows and Consolidated Statement of Stockholders' Equity.

The Company leases its corporate headquarters, various other facilities for distribution, manufacturing, and offices, as well as vehicles, forklifts and other equipment. The Company determines if an arrangement is a lease at inception. Leases are included in "Right of use asset, leases" ("ROU Assets"), and the current portion of the lease liability is included in "Lease liabilities" and the non-current portion is included in "Long-term lease liabilities" in the Condensed Consolidated Balance Sheet. The Company currently has an immaterial amount of financing leases and leases with ~~a term~~terms of more than one month and less than 12 months. ROU Assets and lease liabilities are recognized based on the present value of lease payments over the lease term. Because most of the Company’s leases do not provide an implicit rate of return, the Company uses its incremental collateralized borrowing rate, on a regional basis, in determining the present value of lease payments. The incremental borrowing rate is dependent upon duration of the lease and has been segmented into three groups of time. All leases within the same region and the same group of time share the same incremental borrowing rate. The Company has lease agreements with lease and non-lease components, which are combined for accounting ~~purposes.~~purposes for all classes of assets except information technology equipment.

The components of lease expense were as follows:



	Three Months Ended March 31,
(in millions)	2020			2019
Operating lease cost	$	7.3		$	7.0
Sublease income	(0.4		)	(0.4		)
Total lease cost	$	6.9		$	6.6

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

~~The components of lease expense were as follows:~~

Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2019 2019
Operating lease cost $ 7.3
$ 21.7
Sublease income (0.5 ) (1.3 )
Total lease cost $ 6.8
$ 20.4

Other information related to leases was as follows:


	Nine Months Ended September 30,			Three Months Ended March 31,
(in millions, except lease term and discount rate)	2019			2020			2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	22.4		$	7.3		$	8.0
Right-of-use assets obtained in exchange for lease obligations:
Operating leases(1)	$	25.6		$	1.0		$	(1.4	)

Weighted average remaining lease term:
Operating leases	7.2 years			6.9 years

Weighted average discount rate:
Operating leases	5.3		%	5.3		%

(1) In the first quarter of 2019, the Company signed a sub-lease for one of its distribution centers.

Future minimum lease payments, net of sub-lease income, for all non-cancelable leases as of ~~September 30, 2019~~March 31, 2020 were as follows:


(in millions)
2019	$	6.8
2020	24.7		$	18.9
2021	20.8		22.0
2022	17.0		18.0
2023	12.9		13.8
2024	11.4		11.8
2025			8.8
Thereafter	40.3		31.0
Total minimum lease payments	133.9		124.3
Less imputed interest	28.2		22.7
Future minimum payments for leases, net of sublease rental income and imputed interest	$	105.7	$	101.6

~~ACCO Brands Corporation and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~

6. Pension and Other Retiree Benefits

The components of net periodic benefit (income) cost for pension and post-retirement plans for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019 were as follows:


	Three Months Ended September 30,																		Three Months Ended March 31,
	Pension												Post-retirement						Pension												Post-retirement
	U.S.						International												U.S.						International
(in millions)	2019			2018			2019			2018			2019			2018			2020			2019			2020			2019			2020			2019
Service cost	$	0.3		$	0.4		$	0.3		$	0.6		$	—		$	—		$	0.4		$	0.4		$	0.4		$	0.3		$	—		$	—
Interest cost	1.8			1.6			3.3			3.1			0.1			0.1			1.5			1.8			2.4			3.4			—			0.1
Expected return on plan assets	(2.9		)	(2.9		)	(5.1		)	(5.6		)	—			—			(2.9		)	(2.9		)	(4.7		)	(5.1		)	—			—
Amortization of net loss (gain)	0.6			0.7			0.9			0.8			(0.1		)	(0.1		)	0.8			0.5			1.2			0.8			(0.1		)	(0.1		)
Amortization of prior service cost	0.1			0.1			0.1			—			—			—			0.1			0.1			0.1			—			—			—
Curtailment gain	—			—			—			(0.6		)	—			—
Net periodic benefit income⁽¹⁾	$	(0.1	)	$	(0.1	)	$	(0.5	)	$	(1.7	)	$	—		$	—		$	(0.1	)	$	(0.1	)	$	(0.6	)	$	(0.6	)	$	(0.1	)	$	—

	Nine Months Ended September 30,
	Pension												Post-retirement
	U.S.						International
(in millions)	2019			2018			2019			2018			2019			2018
Service cost	$	1.0		$	1.2		$	0.9		$	1.6		$	—		$	—
Interest cost	5.5			5.0			10.1			9.8			0.2			0.1
Expected return on plan assets	(8.7		)	(8.8		)	(15.4		)	(17.3		)	—			—
Amortization of net loss (gain)	1.6			2.0			2.6			2.6			(0.3		)	(0.3		)
Amortization of prior service cost	0.3			0.3			0.1			—			—			—
Curtailment gain	—			—			—			(0.6		)	—			—
Net periodic benefit income⁽¹⁾	$	(0.3	)	$	(0.3	)	$	(1.7	)	$	(3.9	)	$	(0.1	)	$	(0.2	)


(1)	The components, other than service cost, are included in the line "Non-operating pension income" in the Consolidated Statements of ~~Income.~~Operations.

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

We expect to contribute approximately $~~20.4~~19.5 million to our defined benefit plans in ~~2019~~2020. For the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020, we have contributed $~~16.1~~5.7 million to these plans.

7. Stock-Based Compensation

The following table summarizes our stock-based compensation expense (including stock options, restricted stock units ("RSUs") and performance stock units ("PSUs")) for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019:


	Three Months Ended September 30,						Nine Months Ended September 30,				Three Months Ended March 31,
(in millions)	2019			2018			2019		2018		2020			2019
Stock option compensation expense	$	0.7		$	0.5		$	2.0	$	1.5	$	0.8		$	0.5
RSU compensation expense	1.2			0.8			4.1		3.7		1.0			1.0
PSU compensation expense	(1.0		)	(2.5		)	0.2		0.8		(0.9		)	0.5
Total stock-based compensation expense	$	0.9		$	(1.2	)	$	6.3	$	6.0	$	0.9		$	2.0

We generally recognize compensation expense for stock-based awards ratably over the vesting period. ~~Stock-based~~During the first quarter of 2020, the Company's Board of Directors approved stock compensation ~~expense for each~~grants which consisted of ~~the nine~~ ~~months endedSeptember 30, 2019~~1,402,829 stock options, 600,014 RSUs and ~~2018 includes $1.0 million of expense related to stock awards granted to eligible non-employee directors, which were fully vested on the grant date.~~

~~ACCO Brands Corporation and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~

918,911 PSUs.

The following table summarizes our unrecognized compensation expense and the weighted-average period over which the expense will be recognized as of ~~September 30, 2019:~~March 31, 2020:


	September 30, 2019		March 31, 2020
	Unrecognized	Weighted Average	Unrecognized	Weighted Average
	Compensation	Years Expense To Be	Compensation	Years Expense To Be
(in millions, except weighted average years)	Expense	Recognized Over	Expense	Recognized Over
Stock options	$4.2	2.0	$6.9	2.4
RSUs	$6.8	2.0	$9.3	2.3
PSUs	$5.7	2.1	$3.2	2.5

8. Inventories

The components of inventories were as follows:


(in millions)	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Raw materials	$	43.2	$	55.4	$	45.6	$	44.4
Work in process	3.9		4.3		2.9		3.5
Finished goods	265.4		280.9		243.1		235.4
Total inventories	$	312.5	$	340.6	$	291.6	$	283.3

9. Goodwill and Identifiable Intangible Assets

Goodwill

As more fully described in the Company’s ~~2018~~2019 Annual Report on Form 10-K, we test goodwill for impairment at least annually and on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred. The Company performed this annual assessment, on a qualitative basis, as allowed by GAAP, in the second quarter of 2019 and concluded that no impairment existed.

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Changes in the net carrying amount of goodwill by segment were as follows:


(in millions)	ACCO Brands North America		ACCO Brands EMEA			ACCO Brands International			Total			ACCO Brands North America		ACCO Brands EMEA			ACCO Brands International			Total
(in millions)	ACCO Brands North America		ACCO Brands EMEA						Total			ACCO Brands North America					ACCO Brands International			Total
Balance at December 31, 2018	$	375.6	$	165.6		ACCO Brands International	$	167.7		$	708.9
Balance at December 31, 2019												$	375.6	ACCO Brands EMEA	$	165.7		$	177.3		$	718.6
Acquisitions	—		—			12.3			12.3			—		—			(0.5		)	(0.5		)
Foreign currency translation	—		(10.4		)	(1.1		)	(11.5		)	—		2.1			(2.5		)	(0.4		)
Balance at September 30, 2019	$	375.6	$	155.2		$	178.9		$	709.7
Balance at March 31, 2020												$	375.6	$	167.8		$	174.3		$	717.7

The goodwill balance is net of $215.1 million of accumulated impairment losses, which occurred prior to December 31, 2016.

Identifiable Intangible Assets

Foroni Acquisition

The ~~preliminary~~ valuation of identifiable intangible assets of ~~$10.2~~$11.1 million acquired in the Foroni Acquisition includes an amortizable trade name, "Foroni^®," which has been recorded at its estimated fair value. The fair value of the trade name was determined using the relief from royalty method, which is based on the present value of royalty fees derived from projected revenues. The Foroni^® trade name is expected to be amortized over 23 years on a straight-line basis.

~~ACCO Brands Corporation and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~

~~Cumberland Asset Acquisition~~

The valuation of identifiable intangible assets of $3.2 million acquired in the Cumberland Asset Acquisition includes an amortizable trade name and amortizable customer relationships, which have been recorded at their estimated fair values. The fair value of the trade name was determined using the relief from royalty method, which is based on the present value of royalty fees derived from projected revenues. The fair value of the customer relationships was determined using the multi-period excess earnings method which is based on the present value of the projected after-tax cash flows.

The amortizable trade name is expected to be amortized over 10 years on a straight-line basis while the customer relationships will be amortized on an accelerated basis over 7 years from January 31, 2019, the date the Cumberland assets were acquired by the Company. The allocation of the identifiable intangibles acquired in the Cumberland Asset Acquisition was as follows:

(in millions) Fair Value Remaining Useful Life Ranges
Trade name - amortizable $ 0.8
10 Years
Customer relationships 2.4
7 Years
Total identifiable intangibles acquired $ 3.2

~~GOBA Acquisition~~

The valuation of identifiable intangible assets of $10.3 million acquired in the GOBA Acquisition includes an amortizable trade name and amortizable customer relationships, which have been recorded at their estimated fair values. The fair value of the trade name was determined using the relief from royalty method, which is based on the present value of royalty fees derived from projected revenues. The fair value of the customer relationships was determined using the multi-period excess earnings method which is based on the present value of the projected after-tax cash flows.

The amortizable trade name is expected to be amortized over 15 years on a straight-line basis, while the customer relationships will be amortized on an accelerated basis over 10 years from July 2, 2018, the date GOBA was acquired by the Company. The allocation of the identifiable intangibles acquired in the GOBA Acquisition was as follows:

(in millions) Fair Value Remaining Useful Life Ranges
Trade name - amortizable $ 3.8
15 Years
Customer relationships 6.5
10 Years
Total identifiable intangibles acquired $ 10.3

~~ACCO Brands Corporation and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~

~~The Company's~~ gross carrying value and accumulated amortization by class of identifiable intangible assets as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, was as follows:


	September 30, 2019								December 31, 2018								March 31, 2020								December 31, 2019
(in millions)	Gross Carrying Amounts		Accumulated Amortization				Net Book Value		Gross Carrying Amounts		Accumulated Amortization				Net Book Value		Gross Carrying Amounts		Accumulated Amortization				Net Book Value		Gross Carrying Amounts		Accumulated Amortization				Net Book Value
Indefinite-lived intangible assets:
Trade names	$	462.8	$	(44.5	)	⁽¹⁾	$	418.3	$	471.7	$	(44.5	)	⁽¹⁾	$	427.2	$	454.2	$	(44.5	)	⁽¹⁾	$	409.7	$	467.3	$	(44.5	)	⁽¹⁾	$	422.8
Amortizable intangible assets:
Trade names	312.9		(80.0		)		232.9		306.0		(70.5		)		235.5		308.4		(85.8		)		222.6		316.7		(83.7		)		233.0
Customer and contractual relationships	236.9		(135.4		)		101.5		240.2		(120.5		)		119.7		232.9		(143.2		)		89.7		241.0		(142.3		)		98.7
Patents	5.3		(1.2		)		4.1		5.5		(0.9		)		4.6		5.4		(1.5		)		3.9		5.5		(1.4		)		4.1
Subtotal	555.1		(216.6		)		338.5		551.7		(191.9		)		359.8		546.7		(230.5		)		316.2		563.2		(227.4		)		335.8
Total identifiable intangibles	$	1,017.9	$	(261.1	)		$	756.8	$	1,023.4	$	(236.4	)		$	787.0	$	1,000.9	$	(275.0	)		$	725.9	$	1,030.5	$	(271.9	)		$	758.6


(1)	Accumulated amortization prior to the adoption of authoritative guidance on goodwill and other intangible assets, at which time further amortization ceased.

The ~~Company’s~~ intangible amortization expense was ~~$8.6~~$8.4 million and ~~$9.4~~$9.3 million for the three months ended ~~September 30,~~March 31, 2020 and 2019, respectively.

ACCO Brands Corporation and ~~2018, respectively, and $26.8 million and $27.2 million for the nine months ended September 30, 2019 and 2018, respectively.~~Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Estimated amortization expense for amortizable intangible assets as of ~~September 30, 2019,~~March 31, 2020, for the current year and the next five years ~~are~~is as follows:


(in millions)	2019		2020		2021		2022		2023		2024		2020		2021		2022		2023		2024		2025
Estimated amortization expense⁽²⁾	$	35.7	$	32.4	$	28.7	$	25.1	$	22.9	$	21.2	$	32.0	$	28.4	$	24.9	$	22.6	$	21.0	$	19.4


(2)	Actual amounts of amortization expense may differ from estimated amounts due to changes in foreign currency exchange rates, additional intangible asset acquisitions, impairment of intangible assets, accelerated amortization of intangible assets and other events.

We test indefinite-lived intangibles for impairment at least annually and on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred. We performed this annual assessment, on a qualitative basis, as allowed by GAAP, for our indefinite-lived trade names in the second quarter of 2019 and concluded that no impairment existed.

COVID-19 Impact

We continue to monitor the significant global economic uncertainty as a result of COVID-19 to assess the outlook for demand for our products and the impact on our business and our overall financial performance. This includes our risk of impairment losses to our goodwill and indefinite-lived intangible assets. Although the potential impact of COVID-19 related demand is uncertain, we remain committed to the strategic actions necessary to preserve the long-term forecasted financial performance and expect the macroeconomic environment will recover in the medium to long-term. As a result of our analysis, and consideration of events and circumstances, we concluded that there were no triggering events that would make it more likely than not that our goodwill or indefinite-lived intangible assets were impaired as of March 31, 2020.

10. Restructuring

The Company recorded ~~$2.1~~$0.3 million and ~~$4.8~~$2.7 million of restructuring expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, respectively. The restructuring expenses are primarily for severance costs related to cost reduction initiatives in our North America and International segments.

~~ACCO Brands Corporation and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~

The summary of the activity in the restructuring liability for the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, was as follows:


(in millions)	Balance at December 31, 2018		Provision		Cash Expenditures			Non-cash Items/ Currency Change			Balance at September 30, 2019		Balance at December 31, 2019		Provision		Cash Expenditures			Non-cash Items/ Currency Change			Balance at March 31, 2020
Employee termination costs⁽¹⁾	$	7.9	$	4.1	$	(7.2	)	$	(0.2	)	$	4.6	$	10.7	$	0.3	$	(2.0	)	$	(0.4	)	$	8.6
Termination of lease agreements⁽²⁾	1.8		0.1		(1.6		)	—			0.3		0.6		—		(0.5		)	—			0.1
Other⁽³⁾	—		0.6		(0.1		)	—			0.5		0.5		—		(0.1		)	—			0.4
Total restructuring liability	$	9.7	$	4.8	$	(8.9	)	$	(0.2	)	$	5.4	$	11.8	$	0.3	$	(2.6	)	$	(0.4	)	$	9.1

(1) We expect the remaining ~~$4.6~~$8.6 million employee termination costs to be substantially paid in the next 12twelve months.

(2) We expect the remaining ~~$0.3~~$0.1 million termination of lease costs to be substantially paid in the next 6three months.

(3) We expect the remaining ~~$0.5~~$0.4 million of other costs to be substantially paid in the next 6six months.

The summary of the activity in the restructuring liability for the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, was as follows:


(in millions)	Balance at December 31, 2017		Provision		Cash Expenditures			Non-cash Items/ Currency Change			Balance at September 30, 2018		Balance at December 31, 2018		Provision		Cash Expenditures			Non-cash Items/ Currency Change		Balance at March 31, 2019
Employee termination costs	$	12.0	$	4.2	$	(8.7	)	$	(0.4	)	$	7.1	$	7.9	$	2.7	$	(2.9	)	$	—	$	7.7
Termination of lease agreements	0.8		3.5		(1.6		)	(0.1		)	2.6		1.8		—		(1.0		)	—		0.8
Other	0.5		0.2		(0.5		)	—			0.2
Total restructuring liability	$	13.3	$	7.9	$	(10.8	)	$	(0.5	)	$	9.9	$	9.7	$	2.7	$	(3.9	)	$	—	$	8.5

11. Income Taxes

For the three months ended ~~September 30,~~March 31, 2020, we recorded an income tax expense of $3.1 million on income before taxes of $11.1 million, for an effective rate of 27.9 percent. The decrease in effective tax rate for the period was primarily due to a reduction in nondeductible interest expense in the current year, and an increase in reserves for uncertain tax positions in the prior year.

For the three months ended March 31, 2019, we recorded an income tax expense of ~~$12.2~~$10.6 million on income before taxes of ~~$40.2~~$10.0 million, for an effective rate of ~~30.3 percent.~~

~~For the three months ended September 30, 2018, we recorded an income tax expense of $13.4 million on income before taxes of $49.0 million, for an effective rate of 27.3 percent.~~

~~For the nine months ended September 30, 2019, we recorded an income tax expense of $38.1 million on income before taxes of $101.4 million, for an effective rate of 37.6~~106.0 percent. The ~~increase in~~high effective tax rate for the ~~period is~~quarter was primarily due to the Company increasing its reserves for uncertain tax positions ~~during the first quarter of 2019,~~ in connection with the Brazil Tax Assessments (see Brazil Tax Assessments below) in the amount of $5.6 million and the recording of deferred state taxes on unremitted non-U.S. earnings in the amount of $0.8 million and ~~$1.6 million of Brazilian income taxes accrued on a contingent gain resulting from a reduction of the Brazilian indirect~~other reserves related to various tax ~~base (see "Note 18. Commitments and Contingencies - Brazil Tax Credits").~~

For the nine months ended September 30, 2018, we recorded an income tax expense of $27.4 million on income before taxes of $99.1 million, for an effective rate of 27.6 percent. The tax expense for the nine months ended September 30, 2018 included an excess tax benefit resulting from the realization of stock-based compensation related tax deductions, the partial release of the reserve for the uncertain tax positions in connection with the Brazil Tax Assessments resulting from the expiration of the statute of limitation for the 2011 tax year, and positive impacts attributable to the Tax Cuts and Jobs Act (the "U.S. Tax Act") and foreign tax refunds. This was partially offset by the revaluation of the deferred tax assets and liabilities resulting from the decrease in the Swedish corporate tax rate.contingencies.

The U.S. federal statute of limitations remains open for the years ~~2015~~2016 and forward. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from 2 to 5 years. Years still open to examination by foreign tax authorities in major jurisdictions include Australia (2015 forward), Brazil (2014 forward), ~~Brazil (2013 forward),~~ Canada ~~(2014~~(2015 forward), Germany ~~(2014~~(2015 forward), Sweden ~~(2013~~(2015 forward) and the U.K. ~~(2017~~(2018 forward). We are currently under examination in certain foreign jurisdictions.

~~Immaterial Out-of-Period Adjustment~~

~~The~~ ~~$5.6 million~~ tax expense resulting from the increase in the reserve related to uncertain tax positions in connection with the Brazil Tax Assessments that was recorded in the first quarter of 2019 should properly have been recorded in 2018 when the

~~ACCO Brands Corporation and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~

Company decided to appeal an administrative decision to the judicial level. The impact of recording this out-of-period adjustment to our Consolidated Statements of Income in the three months ended March 31, 2019, is a $5.6 million increase in our income tax expense and a $5.6 million decrease to our Net Income, resulting in a Net Loss for the three months ended March 31, 2019; the Company has concluded that this amount would not have been material to its Net Income for the twelve months ended December 31, 2018, or its expected Net Income for the twelve months ended December 31, 2019. Further, the impact of the correction was not material to either our Condensed Consolidated Balance Sheets, our Condensed Consolidated Statements of Cash Flows or our Consolidated Statement of Stockholders' Equity. This amount is not expected to be paid in cash in the foreseeable future, and would only be paid in the event that we do not ultimately prevail in the case.

Brazil Tax Assessments

In connection with our May 1, 2012, acquisition of the Mead Consumer and Office Products business ("Mead C&OP"), we assumed all of the tax liabilities for the acquired foreign operations including Tilibra Produtos de Papelaria Ltda. ("Tilibra"). In December of 2012, the Federal Revenue Department of the Ministry of Finance of Brazil ("FRD") issued a tax assessment against Tilibra, challenging the tax deduction of goodwill from Tilibra's taxable income for the year 2007 (the "First Assessment"). A second assessment challenging the deduction of goodwill from Tilibra's taxable income for the years 2008, 2009 and 2010 was issued by FRD in October 2013 (the "Second Assessment" and together with the First Assessment, the "Brazil Tax Assessments"). Tilibra is disputing both of the tax assessments.

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

The final administrative appeal of the Second Assessment was decided against the Company in 2017. In 2018, ~~the Company~~we decided to appeal this decision to the judicial level. In the event we do not prevail at the judicial level, ~~the Company~~we will be required to pay an additional ~~amount~~penalty representing attorneys' costs and ~~fees. Accordingly,~~fees; accordingly, in the first quarter of 2019, the Company recorded an additional reserve in the amount of $5.6 million ~~reflecting the increased liability, bringing the total reserve to~~ ~~$27.5 million~~ ~~for the Second Assessment.~~. In connection with the judicial challenge, we were required to provide security to guarantee payment of the Second Assessment should we not prevail. The First Assessment is still being challenged through established administrative procedures.

We believe we have meritorious defenses and intend to vigorously contest both of the assessments; however, there can be no assurances that we will ultimately prevail. The ultimate outcome will not be determined until the Brazilian tax appeal process is complete, which is expected to take a number of years. If the FRD's initial position is ultimately sustained, payment of the amount assessed would materially and adversely affect our 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, we consider the outcome of ~~these disputes~~this dispute to be uncertain. Since it is not more likely than not that we will prevail, in 2012, we recorded a reserve in the amount of $44.5 million (at December 31, 2012 exchange rates) in consideration of this contingency, of which $43.3 million was recorded as an adjustment to the purchase price and which included the 2007-2012 tax years plus penalties and interest through December 2012. Included in this reserve is an assumption of penalties at 75 percent, which is the standard penalty. While there is a possibility that a penalty of 150 percent could be imposed in connection with the First Assessment, based on the facts in our case and existing precedent, we believe the likelihood of a 150 percent penalty is not more likely than not as of ~~September 30, 2019.~~March 31, 2020. We will continue to actively monitor administrative and judicial court decisions and evaluate their impact, if any, on our legal assessment of the ultimate outcome of our disputes. In addition, we will continue to accrue interest related to this contingency until such time as the outcome is known or until evidence is presented that we are more likely than not to prevail. The time limit for issuing an assessment for 2011 and 2012 expired in January 2018 and January 2019, respectively. Since we did not receive an ~~assessment;~~assessments for either of these periods, we ~~therefore~~ reversed the amounts previously accrued, including $5.6 million ~~of reserves~~ related to 2011, which was reversed in the first quarter of 2018. During the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ we accrued additional interest as a charge to current income tax expense of ~~$0.3~~$0.1 million and $0.3 ~~million, respectively, and for the nine months ended September 30, 2019 and 2018, we accrued additional interest of $0.9 million and $0.9~~ million, respectively. At current exchange rates, our accrual through ~~September 30, 2019,~~March 31, 2020, including tax, penalties and interest is ~~$33.4 million.~~$27.0 million (reported in "Other non-current liabilities").

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

12. Earnings per Share

Total outstanding shares as of ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019, were ~~97.2~~94.4 million and ~~102.7~~102.5 million, respectively. Under our stock repurchase program, for the three ~~and nine~~ months ended ~~September 30,~~ March 31, 2020 and 2019, we repurchased and retired ~~2.3~~2.7 million and ~~7.0~~1.3 million, shares, respectively. For the three ~~and nine~~ months ended ~~September 30, 2018, the shares repurchased~~March 31, 2020 and ~~retired were 2.0~~2019, we acquired 0.2 million and ~~6.0 million, respectively. For the nine months ended September 30, 2019 and 2018, we acquired~~ 0.5 ~~million and 0.6~~ million shares, respectively, related to tax withholding for share-based compensation.

The calculation of basic earnings per share of common stock is based on the weighted-average number of shares of common stock outstanding in the year, or period, over which they were outstanding. Our calculation of diluted earnings per share of common stock assumes that any shares of common stock outstanding were increased by shares that would be issued upon exercise of those stock awards for which the average market price for the period exceeds the exercise price less the shares that could have been purchased by the Company with the related proceeds, including compensation expense measured but not yet recognized.

Our weighted-average shares outstanding for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ was as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,		Three Months Ended March 31,
(in millions)	2019	2018	2019	2018	2020	2019
Weighted-average number of shares of common stock outstanding - basic	97.6	103.8	100.4	105.6	96.0	102.3
Stock options	0.4	1.1	0.4	1.1	0.2	—
Restricted stock units	0.9	1.0	1.1	1.2	1.3	—
Weighted-average shares and assumed conversions - diluted(1)	98.9	105.9	101.9	107.9	97.5	102.3

(1)

Due to the net loss during the three months ended March 31, 2019, the denominator in the diluted earnings per share calculation does not include the effects of the stock awards for which the average market price for the period exceeds the exercise price, as it would result in a less dilutive computation. As a result, reported diluted earnings per share for the three months ended March 31, 2019 are the same as basic earnings per share.

Awards of potentially dilutive shares of common stock, which have exercise prices that were higher than the average market price during the period, are not included in the computation of dilutive earnings per share as their effect would have been anti-dilutive. For the three ~~and nine~~ months ended ~~September 30,~~ March 31, 2020 and 2019, the number of anti-dilutive shares was approximately ~~5.0~~5.2 million, and ~~4.7~~5.8 million, ~~respectively, and for the three and nine months ended September 30, 2018, the number of anti-dilutive shares was approximately 3.8 million and 3.6 million,~~ respectively.

13. Derivative Financial Instruments

We are exposed to various market risks, including changes in foreign currency exchange rates and interest rate changes. We enter into financial instruments to manage and reduce the impact of these risks, not for trading or speculative purposes. The counterparties to these financial instruments are major financial institutions. We continually monitor our foreign currency exposures in order to maximize the overall effectiveness of our foreign currency hedge positions. Principal currencies hedged against the U.S. dollar include the Euro, Australian dollar, Canadian dollar, Swedish krona, British pound and Japanese yen. We are subject to credit risk, which relates to the ability of counterparties to meet their contractual payment obligations or the potential non-performance by counterparties to financial instrument contracts. Management continues to monitor the status of our counterparties and will take action, as appropriate, to further manage our counterparty credit risk. There are no credit contingency features in our derivative financial instruments.

When hedge accounting is applicable, on the date we enter into a derivative, the derivative is designated as a hedge of the identified exposure. We measure the effectiveness of our hedging relationships both at hedge inception and on an ongoing basis.

Forward Currency Contracts

We enter into forward foreign currency contracts with third parties to reduce the effect of fluctuating foreign currencies, primarily on foreign denominated inventory purchases and intercompany loans. The majority of the Company’s exposure to local currency movements is in Europe (the Euro, the Swedish krona and the British pound), Brazil, Australia, Canada, ~~Brazil,~~ and Mexico.

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Forward currency contracts are used to hedge foreign denominated inventory purchases for Europe, Australia, Canada, Japan and New Zealand, and are designated as cash flow hedges. Unrealized gains and losses on these contracts are deferred in Accumulated Other Comprehensive Income ("AOCI") until the contracts are settled and the underlying hedged transactions relating to inventory purchases are recognized, at which time the deferred gains or losses will be reported in the "Cost of products sold" line in the "Consolidated Statements of ~~Income.~~Operations." As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, we had ~~cash-flow-designated~~cash flow foreign exchange contracts outstanding with a U.S. dollar equivalent notional value of ~~$103.7~~$91.8 million and ~~$98.7~~$96.7 million, ~~respectively.~~respectively, which were designated as hedges.

Forward currency contracts used to hedge foreign denominated intercompany loans are not designated as hedging instruments. Gains and losses on these derivative instruments are recognized within "Other ~~(income) expense,~~income, net" in the "Consolidated Statements of ~~Income"~~Operations" and are largely offset by the change in the current translated value of the hedged item. The periods of the forward foreign exchange contracts correspond to the periods of the hedged transactions, and do not extend beyond ~~September 2020, except for one relating to intercompany loans which extends to December 2020.~~May 2024. As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, we had ~~undesignated~~ foreign exchange contracts outstanding with a U.S. dollar equivalent notional value of ~~$85.5~~$159.5 million and ~~$113.3~~$182.6 million, ~~respectively.~~respectively, which were not designated as hedges.

The following table summarizes the fair value of our derivative financial instruments as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:

Fair Value of Derivative Instruments
Derivative Assets Derivative Liabilities
(in millions) Balance Sheet
Location September 30, 2019 December 31,
2018 Balance Sheet
Location September 30, 2019 December 31,
2018
Derivatives designated as hedging instruments:
Foreign exchange contracts Other current assets $ 2.0
$ 3.3
Other current liabilities $ 0.3
$ 0.1
Derivatives not designated as hedging instruments:
Foreign exchange contracts Other current assets —
0.6
Other current liabilities 1.0
1.7
Foreign exchange contracts Other non-current assets 1.5
12.7
Other non-current liabilities 1.5
12.7
Total derivatives $ 3.5
$ 16.6
$ 2.8
$ 14.5

~~ACCO Brands Corporation and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~



	Fair Value of Derivative Instruments
	Derivative Assets					Derivative Liabilities
(in millions)	Balance Sheet Location	March 31, 2020		December 31, 2019		Balance Sheet Location	March 31, 2020		December 31, 2019
Derivatives designated as hedging instruments:
Foreign exchange contracts	Other current assets	$	3.7	$	0.4	Other current liabilities	$	0.4	$	0.9
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Other current assets	5.3		7.6		Other current liabilities	1.2		8.6
Foreign exchange contracts	Other non-current assets	4.0		—		Other non-current liabilities	4.0		—
Total derivatives		$	13.0	$	8.0		$	5.6	$	9.5

The following tables summarize the pre-tax effect of our derivative financial instruments on the condensed consolidated financial statements for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:


	The Effect of Derivative Instruments in Cash Flow Hedging Relationships on the Condensed Consolidated Financial Statements												The Effect of Derivative Instruments in Cash Flow Hedging Relationships on the Condensed Consolidated Financial Statements
	Amount of Gain (Loss) Recognized in AOCI (Effective Portion)					Location of (Gain) Loss Reclassified from AOCI to Income	Amount of (Gain) Loss Reclassified from AOCI to Income (Effective Portion)						Amount of Gain (Loss) Recognized in AOCI (Effective Portion)				Location of (Gain) Loss Reclassified from AOCI to Income	Amount of (Gain) Loss Reclassified from AOCI to Income (Effective Portion)
	Three Months Ended September 30,						Three Months Ended September 30,						Three Months Ended March 31,					Three Months Ended March 31,
(in millions)	2019		2018				2019			2018			2020		2019			2020			2019
Cash flow hedges:												Cash flow hedges:
Foreign exchange contracts	$	2.7	$	(3.6	)	Cost of products sold	$	(0.7	)	$	2.6	Foreign exchange contracts	$	4.5	$	0.2	Cost of products sold	$	(1.2	)	$	(1.7	)

	The Effect of Derivative Instruments in Cash Flow Hedging Relationships on the Condensed Consolidated Financial Statements
	Amount of Gain (Loss) Recognized in AOCI (Effective Portion)					Location of (Gain) Loss Reclassified from AOCI to Income	Amount of (Gain) Loss Reclassified from AOCI to Income (Effective Portion)
	Nine Months Ended September 30,						Nine Months Ended September 30,
(in millions)	2019		2018				2019			2018
Cash flow hedges:
Foreign exchange contracts	$	2.3	$	(1.6	)	Cost of products sold	$	(3.6	)	$	5.5


	The Effect of Derivatives Not Designated as Hedging Instruments on the Consolidated Statements of Income											The Effect of Derivatives Not Designated as Hedging Instruments on the Consolidated Statements of Operations
	Location of (Gain) Loss Recognized in Income on Derivatives	Amount of (Gain) Loss Recognized in Income					Amount of (Gain) Loss Recognized in Income					Location of (Gain) Loss Recognized in Income on Derivatives	Amount of (Gain) Loss Recognized in Income
		Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended March 31,
(in millions)		2019			2018		2019			2018			2020			2019
Foreign exchange contracts	Other (income) expense, net	$	(0.2	)	$	1.0	$	(0.7	)	$	1.4	Other income, net	$	(9.3	)	$	1.2

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

14. Fair Value of Financial Instruments

In 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 the fair value measurement is categorized in three levels, in order of priority, as described below:



Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2	Unadjusted 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 liability
Level 3	Unobservable inputs for the asset or liability

We utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

~~ACCO Brands Corporation and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~

We have determined that our financial assets and liabilities described in "Note 13. Derivative Financial Instruments" are Level 2 in the fair value hierarchy. The following table sets forth our financial assets and liabilities that were accounted for at fair value on a recurring basis as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:


(in millions)	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Assets:
Forward currency contracts	$	3.5	$	16.6	$	13.0	$	8.0
Liabilities:
Forward currency contracts	$	2.8	$	14.5	$	5.6	$	9.5

Our forward currency contracts are included in "~~Other~~"Other current assets,," "Other current liabilities," "Other non-current assets,~~" "Other current liabilities~~" or "Other non-current liabilities." The forward foreign currency exchange contracts are primarily valued based on the foreign currency spot and forward rates quoted by banks or foreign currency dealers. As such, 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 due principally to their short maturities. The carrying amount of total debt was ~~$923.5~~$929.2 million and ~~$888.0~~$816.0 million and the estimated fair value of total debt was $~~936.1~~906.7 million and $~~848.6~~831.4 million at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019, respectively. The fair values are determined from quoted market prices, where available, and from investment bankers using current interest rates considering credit ratings and the remaining time to maturity.

15. Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Income (Loss) ("AOCI") is defined as net income (loss) ~~income~~ and other changes in stockholders’ equity from transactions and other events from sources other than stockholders. The components of, and changes in, ~~accumulated other comprehensive income (loss), net of tax~~AOCI were as follows:

(in millions) Derivative
Financial
Instruments
Foreign
Currency
Adjustments Unrecognized
Pension and Other
Post-retirement
Benefit Costs Accumulated
Other
Comprehensive
Income (Loss)
Balance at December 31, 2018 $ 2.1
$ (299.2 ) $ (164.6 ) $ (461.7 )
Other comprehensive loss before reclassifications, net of tax 1.4
(22.4 ) 3.2
(17.8 )
Amounts reclassified from accumulated other comprehensive (loss) income, net of tax (2.3 ) —
3.4
1.1
Balance at September 30, 2019 $ 1.2
$ (321.6 ) $ (158.0 ) $ (478.4 )



(in millions)	Derivative Financial Instruments			Foreign Currency Adjustments			Unrecognized Pension and Other Post-retirement Benefit Costs			Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2019	$	(0.2	)	$	(299.5	)	$	(206.0	)	$	(505.7	)
Other comprehensive income (loss) before reclassifications, net of tax	3.3			(49.7		)	6.3			(40.1		)
Amounts reclassified from accumulated other comprehensive (loss) income, net of tax	(0.9		)	—			1.6			0.7
Balance at March 31, 2020	$	2.2		$	(349.2	)	$	(198.1	)	$	(545.1	)

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

The reclassifications out of ~~accumulated other comprehensive income (loss)~~AOCI for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ were as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
	2019			2018			2019			2018				2020			2019
(in millions)	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)						Amount Reclassified from Accumulated Other Comprehensive Income (Loss)						Location on Income Statement	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)						Location on Income Statement
Details about Accumulated Other Comprehensive Income Components													Location on Income Statement							Location on Income Statement
Details about Accumulated Other Comprehensive Income (Loss) Components														Amount Reclassified from Accumulated Other Comprehensive Income (Loss)						Location on Income Statement
Gain (loss) on cash flow hedges:																				Location on Income Statement
Foreign exchange contracts	$	0.7		$	(2.6	)	$	3.6		$	(5.5	)	Cost of products sold	$	1.2		$	1.7		Cost of products sold
Tax (expense) benefit	(0.4		)	0.8			(1.3		)	1.6			Income tax expense
Tax expense														(0.3		)	(0.7		)	Income tax expense
Net of tax	$	0.3		$	(1.8	)	$	2.3		$	(3.9	)		$	0.9		$	1.0
Defined benefit plan items:
Amortization of actuarial loss	$	(1.4	)	$	(1.4	)	$	(3.9	)	$	(4.3	)	(1)	$	(1.9	)	$	(1.2	)	(1)
Amortization of prior service cost	(0.2		)	(0.1		)	(0.4		)	(0.3		)	(1)	(0.2		)	(0.1		)	(1)
Total before tax	(1.6		)	(1.5		)	(4.3		)	(4.6		)		(2.1		)	(1.3		)
Tax benefit	0.5			0.4			0.9			1.1			Income tax expense	0.5			0.2			Income tax expense
Net of tax	$	(1.1	)	$	(1.1	)	$	(3.4	)	$	(3.5	)		$	(1.6	)	$	(1.1	)

Total reclassifications for the period, net of tax	$	(0.8	)	$	(2.9	)	$	(1.1	)	$	(7.4	)		$	(0.7	)	$	(0.1	)


(1)	These ~~accumulated other comprehensive income~~AOCI components are included in the computation of net periodic benefit cost for pension and post-retirement plans. See "Note 6. Pension and Other Retiree Benefits" for additional details.

16. Revenue Recognition

Revenue is recognized when control of the promised goods or services is transferred to our customers in an amount reflective of the consideration we expect to be received in exchange for those goods or services. Taxes we collect concurrent with revenue producing activities are excluded from revenue. Incidental items incurred that are immaterial in the context of the contract are expensed.

At the inception of each contract, the Company assesses the products and services promised and identifies each distinct performance obligation. To identify the performance obligations, the Company considers all products and services promised regardless of whether they are explicitly stated or implied within the contract or by standard business practices.

Freight and distribution activities performed before the customer obtains control of the goods are not considered promised services under customer contracts and therefore are not distinct performance obligations. The Company has chosen to account for shipping and handling activities as a fulfillment activity, and therefore accrues the expense of freight and distribution in "Cost of products sold" when product is shipped.

Service or Extended Maintenance Agreements ("EMAs") As of December 31, ~~2018,~~2019, there was ~~$5.0~~$5.5 million of unearned revenue associated with outstanding EMAs, primarily reported in "Other current liabilities." During the three ~~and nine~~ months ended ~~September 30, 2019, $0.8~~March 31, 2020, $2.8 million ~~and $3.7 million, respectively,~~ of the unearned revenue was earned and recognized. As of ~~September 30, 2019,~~March 31, 2020, the amount of unearned revenue from EMA's was ~~$4.8~~$5.4 million. We expect to earn and recognize approximately ~~$4.2~~$4.7 million of the unearned amount in the next 12 months and ~~$0.6~~$0.7 million in periods beyond the next 12 months.

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

The following tables present our net sales disaggregated by regional geography⁽¹⁾, based upon our reporting business segments and our net sales disaggregated by the timing of revenue recognition for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
(in millions)	2019		2018		2019		2018		2020		2019
United States	$	235.8	$	227.6	$	646.4	$	617.7	$	147.4	$	140.0
Canada	36.6		35.8		94.3		94.1		20.4		20.4
ACCO Brands North America	272.4		263.4		740.7		711.8		167.8		160.4

ACCO Brands EMEA⁽²⁾	133.1		143.1		407.9		438.1		127.5		146.5

Australia/N.Z.	37.1		41.4		100.7		118.8		28.9		32.9
Latin America	52.1		47.6		134.8		106.7		49.0		42.3
Asia-Pacific	11.0		11.8		34.2		36.5		10.9		11.8
ACCO Brands International	100.2		100.8		269.7		262.0		88.8		87.0
Net sales	$	505.7	$	507.3	$	1,418.3	$	1,411.9	$	384.1	$	393.9

(1) Net sales are attributed to geographic areas based on the location of the selling subsidiaries.

(2) ACCO Brands EMEA is comprised largely of Europe, but also includes export sales to the Middle East and Africa.


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
(in millions)	2019		2018		2019		2018		2020		2019
Product and services transferred at a point in time	$	489.8	$	493.3	$	1,370.4	$	1,372.0	$	363.6	$	378.4
Product and services transferred over time	15.9		14.0		47.9		39.9		20.5		15.5
Net sales	$	505.7	$	507.3	$	1,418.3	$	1,411.9	$	384.1	$	393.9

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

17. Information on Business Segments

The Company has 3 operating business segments each of which is comprised of different geographic regions. The Company's 3 segments are as follows:



Operating Segment	Geography	Primary Brands	Primary Products
ACCO Brands North America	United States and Canada	Five Star^®, Quartet^®, AT-A-GLANCE^®, GBC^®, Swingline^®, Kensington^®, Mead^®, and Hilroy^®	School notebooks, planners, dry erase boards, storage and organization products (3-ring binders), stapling, punching, laminating, binding products, and computer accessories

ACCO Brands EMEA	Europe, Middle East and Africa	Leitz^®, Rapid^®, Esselte^®, Kensington^®, Rexel^® GBC^®, NOBO^®, and Derwent^®	Storage and organization products (lever-arch binders, sheet protectors, indexes), stapling, punching, laminating, shredding, do-it-yourself tools, dry erase boards, writing instruments and computer accessories

ACCO Brands International	Australia/N.Z., Latin America and Asia-Pacific	Tilibra^®, GBC^®, Barrilito^®, Foroni^®, Marbig^®, Kensington^®, Artline^®, Wilson Jones^®,Quartet^®, Spirax^®, and Rexel^®Australia/N.Z. only	School notebooks, planners, dry erase boards, storage and organization products (binders, sheet protectors and indexes), stapling, punching, laminating, shredding, writing instruments, janitorial supplies and computer accessories

Each ~~of the Company's 3 operating segments~~business segment designs, markets, sources, manufactures and sells recognized consumer and other end-user demanded branded products used in businesses, schools and homes. Product designs are tailored ~~based on~~to end-user preferences in each geographic ~~region.~~region, and where possible, leverage common engineering, design, and sourcing.

Our product categories include storage and organization; stapling; punching; laminating, shredding and binding ~~and shredding machines and related consumable supplies; whiteboards;~~machines; dry erase boards; notebooks; calendars; computer accessories; and do-it-yourself tools, among others. Our portfolio ~~of consumer and other end-user demanded brands~~ includes both globally and regionally recognized brands.

~~ACCO Brands Corporation~~ The revenue in North America and ~~Subsidiaries~~

~~Notes~~International segments includes significant sales of consumer products that have very important, seasonal selling periods related to ~~Condensed Consolidated Financial Statements (Unaudited) (Continued)~~

back-to-school and calendar year-end. For North America and Mexico, back-to-school straddles the second and third quarters, and for Southern hemisphere it takes place in the fourth and first quarter. We expect sales of consumer products to become a greater percentage of our revenue because demand for consumer back-to-school products is growing faster than demand for most business-related and calendar products.

Customers

We distribute our products through a wide variety of retail and commercial channels to ensure that ~~our products~~they are readily and conveniently available for purchase by consumers and other end-users, wherever they prefer to shop. These channels include mass retailers; e-tailers; discount, drug/grocery and variety chains; warehouse clubs; hardware and specialty stores; independent office product dealers; office superstores; wholesalers; and contract stationers. We also sell directly to commercial and consumer end-users through our e-commerce ~~platform~~sites and our direct sales organization.

~~ACCO Brands North America~~

~~The ACCO Brands North America segment is comprised of the United States and Canada where the Company is a leading branded supplier of consumer and business products under brands such as AT-A-GLANCE~~^®~~, Five Star~~^®~~, GBC~~^®~~, Hilroy~~^®~~, Kensington~~^®~~, Mead~~^®~~, Quartet~~^®~~, and Swingline~~^®.The ACCO Brands North America segment designs, sources or manufactures and distributes school notebooks, calendars, whiteboards, storage and organization products (such as three-ring binders, sheet protectors and indexes), stapling, punching, laminating, binding and shredding products, and computer accessories, among others, which are primarily used in schools, homes and businesses. The majority of revenue in this segment is related to consumer and home products and is associated with the "back-to-school" season and year-end calendar purchases. We expect sales of consumer products to become an increasingly greater percentage of our revenue as demand for consumer products is faster growing than most business-related products.

~~ACCO Brands EMEA~~

The ACCO Brands EMEA segment is comprised largely of Europe, but also includes export sales to the Middle East and Africa. The Company is a leading branded supplier of consumer and business products under brands such as Derwent^®~~, Esselte~~^®~~, GBC~~^®~~, Kensington~~^®~~, Leitz~~^®~~, NOBO~~^®~~, Rapid~~^®~~, and Rexel~~^®.The ACCO Brands EMEA segment designs, manufactures or sources and distributes storage and organization products (such as lever-arch binders, sheet protectors and indexes), stapling, punching, laminating, binding and shredding products, do-it-yourself tools, and computer accessories, among others, which are primarily used in businesses, homes and schools.

~~ACCO Brands International~~

The ACCO Brands International segment is comprised of Australia/N.Z., Latin America and Asia-Pacific where the Company is a leading branded supplier of consumer and business products under brands such as Artline^®~~, Barrilito~~^®~~, Foroni~~^®~~, GBC~~^®~~, Kensington~~^®~~, Marbig~~^®~~, Quartet~~^®~~, Rexel~~^®~~, Tilibra~~^®~~, and Wilson Jones~~^®, among others. The ACCO Brands International segment designs, sources or manufactures and distributes school notebooks, calendars, whiteboards, storage and organization products (such as three-ring binders, sheet protectors and indexes), stapling, punching, laminating, binding and shredding products, writing instruments, and janitorial supplies, among others, which are primarily used in schools, businesses and homes. The majority of revenue in this segment is related to consumer products and is associated with the "back-to-school" season and year-end calendar purchases. We expect sales of consumer products to become an increasingly greater percentage of our revenue as demand for consumer products is faster growing than most business-related products.

~~Net sales by business segment for the three and nine months ended September 30, 2019 and 2018 were as follows:~~

Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2019 2018 2019 2018
ACCO Brands North America $ 272.4
$ 263.4
$ 740.7
$ 711.8
ACCO Brands EMEA 133.1
143.1
407.9
438.1
ACCO Brands International 100.2
100.8
269.7
262.0
Net sales $ 505.7
$ 507.3
$ 1,418.3
$ 1,411.9

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Net sales by business segment for the three months ended March 31, 2020 and 2019 were as follows:



	Three Months Ended March 31,
(in millions)	2020		2019
ACCO Brands North America	$	167.8	$	160.4
ACCO Brands EMEA	127.5		146.5
ACCO Brands International	88.8		87.0
Net sales	$	384.1	$	393.9

Operating income by business segment for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ was as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(in millions)	2019			2018			2019			2018			2020			2019
ACCO Brands North America	$	33.7		$	33.7		$	101.1		$	88.1		$	7.6		$	6.8
ACCO Brands EMEA	13.8			14.6			37.1			37.1			12.0			15.9
ACCO Brands International	10.8			16.1			20.5			25.2			5.9			5.6
Segment operating income	58.3			64.4			158.7			150.4			25.5			28.3
Corporate	(9.5		)	(6.9		)	(30.6		)	(29.4		)	(8.1		)	(10.4		)
Operating income⁽¹⁾	48.8			57.5			128.1			121.0			17.4			17.9
Interest expense	11.5			11.6			33.6			30.9			8.6			10.4
Interest income	(0.7		)	(1.1		)	(2.9		)	(3.5		)	(0.3		)	(0.9		)
Non-operating pension income	(1.3		)	(2.6		)	(4.1		)	(7.1		)	(1.5		)	(1.4		)
Other (income) expense, net	(0.9		)	0.6			0.1			1.6
Other income, net													(0.5		)	(0.2		)
Income before income tax	$	40.2		$	49.0		$	101.4		$	99.1		$	11.1		$	10.0


(1)	Operating income as presented in the segment table above is defined as i) net sales; ii) less cost of products sold; iii) less selling, general and administrative expenses; iv) less amortization of intangibles; and v) less restructuring charges.

18. Commitments and Contingencies

Pending Litigation - Brazil Tax Assessments

In connection with our May 1, 2012, acquisition of the Mead C&OP business, we assumed all of the tax liabilities for the acquired foreign operations including Tilibra Produtos de Papelaria Ltda. ("Tilibra"). For further information, see "Note 11. Income Taxes - Brazil Tax Assessments" for details on tax assessments issued by the FRD against Tilibra challenging the tax deduction of goodwill from Tilibra's taxable income for the years 2007 through 2010. If the FRD's initial position is ultimately sustained, payment of the amount assessed would materially and adversely affect our cash flow in the year of settlement.

Brazil Tax Credits

In March 2017, the Supreme Court of Brazil ruled against the Brazilian tax authority in a leading case related to the computation of certain indirect taxes. The Supreme Court ruled that the indirect tax base should not include a value-added tax known as "ICMS." The Supreme Court decision, in principle, affects all applicable judicial proceedings in progress, and reduces future indirect taxes on our Brazilian subsidiary, Tilibra. However, the Brazilian tax authority has filed an appeal seeking clarification of certain matters, including the amount by which taxpayers would be entitled to reduce their indirect tax base (i.e. the gross ICMS collected or the net ICMS paid). The appeal also requests a modulation of the decision’s effects, which may limit its retrospective impact on taxpayers, including Tilibra.

Tilibra has paid and continues to pay these indirect taxes on a tax base which includes the gross ICMS collected. It has also filed legal actions in Brazil to request reimbursement of these excess tax payments by way of future credits ("Tax Credits") and

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

for permission to exclude the gross ICMS collected from the tax base in future periods. Tilibra’s legal actions cover various time periods and some have been finally decided in a court of law in favor of Tilibra, while others are still pending a final decision.

Due to the uncertainties associated with the scope of the application of the Brazilian Supreme Court’s ruling, taking into account the Brazilian tax authority’s appeal and request for modulation, the Company ~~is treating the potential recovery resulting from the Tax Credits as a contingent gain~~has and ~~intends to record as~~will recognize income only for the amount of Tax Credits actually ~~realized in the periods monetized. As such, the Company~~monetized, which will ~~recognize income~~occur when Tilibra receives a cash flow benefit from applying the Tax Credits against various taxes payable in Brazil. The benefit of the Tax Credits realized by the Company has and will be recorded in the Consolidated Statements of ~~Income~~Operations in the line item "Other ~~(income) expense,~~income, net."

Tilibra has received final decisions for Tax Credits in the amount of $4.3 million, of which ~~it reasonably expects to~~$3.3 million was offset against Brazilian taxes in the fourth quarter of ~~2019.~~2019, with the balance used during the first quarter of 2020. This ~~represents the~~ amount of Tax Credits ~~for the periods for which Tilibra has received favorable final~~

~~ACCO Brands Corporation and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~

~~court decisions and~~ assumes that only the net amount of ICMS paid can be excluded from the tax base. The total value of these Tax Credits was recorded as a gain in Tilibra’s local statutory accounts during the third quarter of 2019, resulting in Brazilian federal taxes payable of approximately $1.6 million.

Final decisions in the remaining legal actions Tilibra has filed may result in additional Tax Credits that could be monetized in future periods. Further, a favorable decision in the leading case by the Brazilian Supreme Court on the methodology to compute the Tax Credits (i.e. gross ICMS collected) would result in additional Tax Credits being available to Tilibra. The amount of these additional Tax Credits may be material.

Foroni, ~~has~~in years prior to acquisition, also filed legal actions in Brazil ~~which seek~~ to recover these excess indirect tax ~~payments made prior to~~payments; however all of Foroni's claims are still pending a final decision. In the ~~acquisition by Tilibra. The Company also intends to recognize income for~~event any Tax Credits from Foroni when Foroni receives a cash flow benefit from applying such Tax Credits against various taxes payable in Brazil. Any net cash benefit recognized as a result of Tax Credits arising from periods prior to August 1, 2019, must be remitted to the former ownersare recovered on behalf of Foroni, in accordance with the terms of the quota purchase ~~agreement.~~agreement we are required to remit such recovery to the former owners of Foroni on a net income tax paid basis and therefore will not recognize any benefit in the Consolidated Statements of Operations.

Other Pending Litigation

We are party to various lawsuits and regulatory proceedings, primarily related to alleged patent infringement, ~~and employee terminations~~ as well as other claims incidental to our business. In addition, we may be unaware of third party claims of intellectual property infringement relating to our technology, brands, or products, and we may face other claims related to business operations. Any litigation regarding patents or other intellectual property could be costly and time-consuming and might require us to pay monetary damages or enter into costly license agreements. We also may be subject to injunctions against development and sale of certain of our products.

It is the opinion of management that ~~other~~(other than the Brazil Tax ~~Assessments,~~Assessments) the ultimate resolution of currently outstanding matters will not have a material adverse effect on our financial condition, results of operations or cash flow. However, there is no assurance that we will ultimately be successful in our defense of any of these matters or that an adverse outcome in any matter will not affect our results of operations, financial condition or cash flow. Further, future claims, lawsuits and legal proceedings could materially and adversely affect our business, reputation, results of operations and financial condition.

Environmental

We are subject to national, state, provincial and/or local environmental laws and regulations concerning the discharge of materials into the environment and the handling, disposal and clean-up of waste materials and ~~otherwise~~other items relating to the protection of the environment. This includes environmental laws and regulations that affect the design and composition of certain of our products. It is not possible to quantify with certainty the potential impact of actions regarding environmental matters, particularly remediation and other compliance efforts that we may undertake in the future. In the opinion of our management, compliance with the present environmental protection laws, before taking into account estimated recoveries from third parties, will not have a material adverse effect upon our capital expenditures, financial condition and results of operations or competitive position.

19. Subsequent Events

Dividends

On ~~October 29, 2019,~~May 1, 2020, the Company's Board of Directors declared a quarterly cash dividend of ~~6.5¢ cent~~$0.065 per share on its common ~~stock, representing an increase of 8.3 percent from 6.0¢ cent in the prior quarter.~~stock. The dividend is payable on ~~December 18, 2019~~June 19, 2020 to stockholders of record as of the close of business on ~~November 29, 2019~~May 27, 2020. The declaration and payment of future dividends will be at the discretion of the Board of Directors and will be dependent upon, among

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

other things, the Company's financial position, results of operations, cash flows, debt covenant compliance, anticipated liquidity needs, and other factors.

Bank Amendment

On May 1, 2020, the Company entered into a Third Amendment (the "Third Amendment") to its Third Amended and Restated Credit Agreement, as amended (the "Credit Agreement"), among the Company, certain subsidiaries of the Company, Bank of America, N.A., as administrative agent, and the other lenders party thereto. Pursuant to the Third Amendment, the Credit Agreement was amended to, among other things:

Increase the maximum consolidated leverage ratio from 3.75:1.00 to 4.75:1.00, stepping back down to 3.75:1.00 for the first fiscal quarter ending after June 30, 2021.

Amend the pricing based on the Company’s consolidated leverage ratio, with a scaled increase in fees based on varying leverage ratios. Per the terms of the Third Amendment, pricing will be locked at LIBOR plus 200 bps until the Company publishes its financial results for the fiscal quarter ended June 30, 2020.

Reduce the Company’s capacity to incur certain other indebtedness, and impose additional limitations on certain restricted payments (other than dividends) and permitted acquisitions.

Require that the Company pay down any amounts on its revolving facility when cash and cash equivalents of the loan parties exceed $100 million.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~INTRODUCTION~~Introduction

Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019 should be read in conjunction with the unaudited condensed consolidated financial statements of ACCO Brands Corporation and the accompanying notes contained therein.

Overview of the Company

ACCO Brands ~~is a designer, marketer~~designs, markets and ~~manufacturer of recognized~~manufactures well-recognized consumer, school, and ~~other end-user demanded brands used in businesses, schools, and homes.~~office products. Our widely known brands include AT-A-GLANCE^®, Barrilito^®, Derwent^®, Esselte^®, Five Star^®, Foroni^®, GBC^®, Hilroy^®, Kensington^®,Leitz^®, Marbig^®, Mead^®, NOBO^®, Quartet^®, Rapid^®, Rexel^®, Swingline^®, Tilibra^® and Wilson Jones^®. ~~More than~~Approximately 75 percent of our net sales come from brands that occupy the No. 1 or No. 2 position in the ~~select~~ product categories in which we compete. We distribute our products through a wide variety of retail and commercial channels to ensure that our products are readily and conveniently available for purchase by consumers and other end-users, wherever they prefer to shop. These channels include mass retailers, e-tailers, discount, drug/grocery and variety chains; warehouse clubs; hardware and specialty stores; independent office product dealers; office superstores; wholesalers; and contract stationers. Our products are sold primarily in the U.S., Europe, Brazil, Australia, Canada, ~~Brazil~~ and Mexico. For the year ended December 31, ~~2018,~~2019, approximately 4243 percent of our net sales were in the U.S.~~; down~~

Our leading product category positions provide the scale to invest in marketing and product innovation to drive profitable growth. Over the long term, we expect to derive much of our growth from ~~45 percent in 2017. This decrease was primarily~~emerging markets such as Latin America and parts of Asia, the ~~result~~Middle East, and Eastern Europe. These areas exhibit sales growth for our product categories. In all of ~~the Esselte~~our markets, we see opportunities for sales growth through share gains, channel expansion, and ~~GOBA acquisitions, which further expanded our international business.~~product enhancements.

Our strategy is to grow our global portfolio of consumer brands, offer more innovative products, increase our presence in faster growing geographies and channels, and diversify our customer base. We plan to supplement organic growth ~~globally~~ with strategic acquisitions in both existing and adjacent product categories. We generate strong operating cash flow, and will continue to ~~focus on strong free cash flow, as well as leveraging~~leverage our cost structure through synergies and productivity savings to drive long-term profit improvement.

In ~~furtherance~~support of ~~our strategy,~~these strategic imperatives, we have ~~transformed~~been transforming our business by acquiring companies with consumer and other end-user demanded brands, ~~and by continuing to diversify~~diversifying our distribution ~~channels. In 2012, we acquired the Mead Consumer~~channels and ~~Office Products business. That acquisition substantially increased~~increasing our presence in North America and Brazil in school and calendar products with well-known consumer brands. In 2016, we purchased the remaining equity interest in Pelikan Artline from our joint venture partner. That purchase enhanced our competitive position in school and business products in Australia and New Zealand and added new categories, including writing instruments and janitorial supplies. In early 2017, we acquired Esselte Group Holdings AB ("Esselte"), which more than doubled our presence in Europe. The purchase of Esselte added several iconic business brands, a significant base of independent dealer customers, and a new product category of do-it-yourself hardware tools. In 2018, we completed the acquisition of GOBA Internacional, S.A. de C.V. in Mexico to extend our presence into new categories. Recently, we completed the acquisition of Indústria Gráfica Foroni Ltda. in Brazil, which expanded our market-leadingglobal presence. ~~Together these~~These acquisitions have meaningfully expanded our portfolio of well-known ~~end-user demanded brands;~~brands, enhanced our competitive position from both a product and channel perspective, and added scale to our operations. Today ACCO Brands is a global enterprise focused on developing innovative, branded consumer products for use in businesses, schools, and homes.

Overview of Performance

For the three months ended March 31, 2020, net sales declined $9.8 million, or 2.5 percent, primarily driven by weakness in EMEA, particularly in March, from COVID-19-related business closures and negative foreign exchange of $10.6 million, which was partially offset by sales from Foroni, which contributed $14.4 million to net sales. Excluding foreign exchange and Foroni, comparable net sales were down 3.5 percent, primarily due to the weakness in EMEA. Operating income declined 2.8 percent, primarily due to foreign exchange, which impacted our operating income by $1.2 million.

Operating cash outflow for the three months ended March 31, 2020, was $25.2 million, which was significantly better than last year's operating cash outflow of $61.3 million. The $36.1 million year-over-year improvement was due to our decision in 2018 to purchase raw materials and finished goods inventory for the 2019 year in late 2018 to secure supply and partially mitigate the effect of anticipated inflation and tariffs. These purchases were paid for in the first quarter of 2019. This year-end inventory build did not repeat in 2019.

COVID-19 Impact

As discussed in more detail in "Part II, Item 1A. Risk Factors" of this Quarterly Report on Form 10-Q, COVID-19 and the actions being taken by national, state and local governments to address it have caused and continue to cause significant disruptions to normal business operations both in and outside of affected areas and have had significant adverse impacts on businesses and financial markets worldwide. Similarly, our business and results of operations have been and will continue to be adversely affected

by these events, as well as the current and expected continued negative impact on the global economy and uncertainties regarding how geographies, distribution channels and consumer behaviors will evolve over time.

Health and Safety of our People

Our top priority is the health and safety of our employees and, in the face of the developing pandemic we immediately took actions to address their safety. Those employees who could do their jobs from home began doing so. In our plants and distribution centers we made modifications to our normal operations because of the COVID-19 outbreak. These modifications vary from country to country depending on local conditions and government mandates but include taking workers’ temperatures daily, practicing social distancing, wearing protective equipment, quarantines consistent with CDC and WHO guidelines, and adjusting schedules as appropriate to reduce unnecessary employee interaction. We also instituted heightened cleaning and sanitization standards. We will continue to monitor our operations and government recommendations regarding employee health and safety and make changes as appropriate. We are beginning to consider the policies and procedures that will need to be in place to ensure the health and safety of our office and administrative employees when they return to the workplace.

Facilities and Supply Chain

During the first quarter, COVID-19 impacted our Chinese supply chain and we experienced and are continuing to experience some out-of-stocks and lost sales, but we have seen continued improvement since then. We currently believe the most significant supply chain issues are largely behind us, but there can be no assurance that there will not be future supply chain disruptions or a reemergence of supply chain impacts as a result of COVID-19. While a small number of our ~~leading product category positions provide~~manufacturing and distribution operations were or currently are closed temporarily, we have been declared an essential business in most jurisdictions and most of our facilities remain open and operating. We are shipping, but at a reduced level based on lower demand, particularly in the ~~scale~~traditional office products area.

Our second and third quarters are heavily driven by the North America back-to-school season. We currently do not anticipate any significant supply chain issues in meeting back-to-school orders. We manufacture approximately 50 percent of our U.S. back-to-school supply domestically, and our manufacturing facilities are open and operating. Additionally, over the past two years we have moved a sizeable amount of manufacturing from China to ~~enable us~~Vietnam. Approximately 30 percent of back-to-school items now come from Vietnam and less than 20 percent come from China.

Cost Reductions

To begin to ~~invest~~address the financial impact of the pandemic on our results of operations, we have undertaken cost-cutting initiatives to better align our cost structure with the expected decline in ~~marketing~~2020 sales. We expect these cost reduction actions, when combined with our normal productivity savings, to reduce costs by approximately $20 million for the second quarter. These actions include reducing discretionary spending such as travel, freezing hiring, delaying non-essential capital spending, as well as numerous actions to reduce payroll and ~~product innovation~~benefit costs. Among others, the payroll-related actions include: temporary salary reductions for most of the staff, ranging from 50 percent for the CEO, to ~~drive profitable growth.~~30 percent for executives, to 10 percent to 30 percent for most other global employees; a temporary 50-percent reduction to the Board of Directors' annual cash retainers; indefinite postponement of 2020 merit increases except where mandated by law; release of 2020 bonus accruals due to lack of achievement; temporary furloughs across the organization; the suspension of company match for the U.S. 401(k) plan; and layoffs of production and distribution employees commensurate with the drop in demand. We are doing everything we can in the short term to mitigate the impact of the pandemic to ensure the long-term health and prosperity of our company and our employees.

Where we qualify, we have also sought to take full advantage of government assistance available to employers in the countries outside the U.S. where we operate. We do not expect these cost reductions to fully offset the impact of reduced sales due to COVID-19 in the second quarter. Further, there can be no assurance that these cost-savings measures, and any additional cost-savings measures we may implement in the future will be sufficient to offset the current and future adverse financial impacts of COVID-19 on our business, results of operation or financial condition. Over the ~~long~~longer term, we will evaluate the need to extend, adjust or convert these actions into more permanent changes depending on the economic and business situation.

Liquidity, Capital Resources and Other Assets

We are in a strong financial position with $93.4 million cash on hand and $450.1 million available for borrowings under our $600 million committed revolving credit facility as of the end of the first quarter. We also recently amended our bank debt maintenance covenant increasing the net debt to EBITDA leverage ratio to 4.75x from 3.75x through the first quarter ending after June 30, 2021. This will provide us additional financial flexibility to cover the anticipated financial impact of COVID-19 should we need it. As of March 31, 2020, our net leverage ratio was 2.8x. We have no debt maturities before May 2024. We also recently

announced that we do not intend to repurchase additional shares during 2020. Our planned use of cash for the remainder of 2020, after funding operating needs, will be to pay dividends and reduce debt.

Given our financial strength, we currently expect to ~~derive much~~be able to maintain adequate liquidity as we manage through the current environment. We also believe that our seasonal borrowings could be higher in the second quarter because lower sales in April will result in lower collections from accounts receivables in the quarter.

Likewise, we are monitoring our working capital, including accounts receivable and inventory. We anticipate an increased level of late payments and potential bad debts as our ~~growth~~customers deal with the COVID-19 impacts on their businesses from ~~faster-growing geographies~~the prolonged period of closure. We are actively managing our receivables and will potentially restrict our own sales to mitigate our risk. In addition, we did not anticipate such a steep drop in demand when we placed orders for purchased finished goods earlier in the year, which is likely to result in elevated inventory levels at the end of the second quarter.

We continue to monitor the significant global economic uncertainty as ~~Latin America and parts~~a result of ~~Asia,~~COVID-19 to assess the ~~Middle East and Eastern Europe. These areas exhibit a growing~~outlook for demand for our ~~product categories. In all~~products and the impact on our business and our overall financial performance. This includes our risk of impairment losses to our goodwill and indefinite-lived intangible assets. Although the potential impact of COVID-19 related demand is uncertain, we remain committed to the strategic actions necessary to preserve the long-term forecasted financial performance and expect the macroeconomic environment will recover in the medium to long-term. As a result of our analysis, and consideration of events and circumstances, we concluded that there were no triggering events that would make it more likely than not that our goodwill or indefinite-lived intangible assets were impaired as of March 31, 2020.

Outlook

During the back half of March 2020, we began to experience a decline in the demand for our products resulting in decreased sales, particularly in our EMEA and International segments, which were the first to experience the full effects of COVID-19 and the government and business response to the pandemic. This trend has continued and expanded into most of our markets ~~we see opportunities for~~and will continue to materially and negatively impact our sales, ~~growth~~earnings and results of operations at least through ~~share gains, channel expansion and innovative products.~~year-end.

We expect demand in the second quarter to be down significantly due to business and school closures, with April anticipated to be the weakest month. While back-to-school sell-in to mass merchants and e-tailers is expected to be similar to last year, we anticipate that sales to our traditional office products customers and other retailers will be down with their customers not open and/or themselves not being operational. Our outlook for second quarter sales decline is a range of 25 percent to 40 percent, including 3 percent impact from adverse foreign exchange. For the full year, visibility is limited and we expect overall demand to be down relative to 2019, with a slowly improving demand level with a wide range of sales outcomes as the year progresses. There may be some variation in the timing of school openings versus normal which could affect the timing of back-to-school sales, but we expect most schools will be open in the fall.

We have limited visibility beyond the second quarter, and we previously withdrew our full year guidance due to our inability to provide a longer-term outlook with confidence. We expect that the pandemic will materially and adversely affect our business, sales, and results of operations for the remainder of 2020; however, we are uncertain as to the magnitude of the longer term impact on our results of operations, financial condition, liquidity, customers, consumers, suppliers, industry and employees.

Acquisitions

Indústria Gráfica Foroni Ltda Acquisition

Effective August 1, 2019, we completed the acquisition (the "Foroni Acquisition") of Indústria Gráfica Foroni Ltda. ("Foroni"), a leading provider of Foroni^®branded notebooks and paper-based school and office products in Brazil. The ~~preliminary~~ purchase price was ~~$42.1~~$41.5 million ~~and is subject to~~inclusive of working capital ~~and other~~ adjustments. We also assumed $7.6 million of debt. The Foroni Acquisition ~~advances~~advanced our strategy to expand in faster growing geographies and product categories, add consumer-centric brands and diversify our customer base. The results of Foroni are included in the ACCO Brands International segment ~~from~~effective August 1, 2019.

~~The results for the three and nine months ended September 30, 2019, include the results of Foroni for two months.~~

~~GOBA Internacional, S.A. de C.V. Acquisition~~

~~The nine months ended September 30, 2019, include the results of GOBA in all months, while only three months are included in the nine months ended September 30, 2018.~~

For further information on the Foroni ~~and GOBA acquisitions,~~Acquisition, see "Note 3. Acquisitions" to the condensed consolidated financial statements contained in Item 1. of this ~~report.~~Quarterly Report on Form 10-Q.

Foreign Exchange Rates

The quarterly ~~and year-to-date~~ average foreign exchange rates ~~have declined relative to the prior-year period~~ for most of our major currencies have declined relative to the U.S. dollar from the prior-year period as detailed below:

2019 3^rdQTR Average Versus 2018 3^rd QTR Average
2019 YTD Average Versus 2018 YTD Average
Currency Increase/(Decline) Increase/(Decline)
Euro (4)% (6)%
Australian dollar (6)% (8)%
Canadian dollar (1)% (3)%
Brazilian real —% (8)%
Swedish krona (7)% (9)%
British pound (5)% (6)%
Mexican peso (2)% (1)%
Japanese yen 3% 1%



		2020 1^ST QTR Average Versus 2019 1^ST QTR Average
Currency		Increase/(Decline)
Euro		(3)%
Brazilian real		(15)%
Australian dollar		(8)%
Canadian dollar		(1)%
Mexican peso		(3)%
Swedish krona		(5)%
British pound		(2)%
Japanese yen		1%

~~Overview of Performance~~

For the three months ended September 30, 2019, net sales declined slightly due to negative foreign exchange of $9.7 million. The acquisition of Foroni contributed $5.7 million in net sales. Comparable net sales, excluding foreign exchange and Foroni were up 0.5 percent with strong sales in North America, partially offset by weakness in EMEA and International. Operating income declined 15.1 percent, primarily due to lower gross margins in our EMEA and International segments and higher SG&A expenses. Foreign exchange further negatively impacted our operating income by $1.1 million.

Operating cash flow for the three months ended September 30, 2019, was $190.8 million, which was significantly higher than last year's operating cash flow of $91.2 million. The $99.6 million year-over-year improvement was due to front loading of payments in the first quarter of 2019 for inventory purchased in the fourth quarter of 2018 to secure supply and partially mitigate the impact of anticipated tariffs. This inventory was consumed during the third quarter and inventory levels are now at a seasonal

~~normal, although reflecting inflation. As a result, payments for inventory in the third quarter were significantly less than a year ago.~~

~~Operating cash flow for the nine months ended September 30, 2019 of $75.1 million decreased $9.6 million compared with last year, primarily due to higher income tax payments in 2019.~~

~~With the high operating cash flow in the quarter we repaid $174 million of our seasonal borrowings in the three months ended September 30, 2019.~~

Consolidated Results of Operations for the Three Months Ended ~~September 30, 2019~~March 31, 2020 and ~~September 30, 2018~~March 31, 2019


	Three Months Ended September 30,						Amount of Change						Three Months Ended March 31,						Amount of Change
(in millions, except per share data)	2019			2018			$			%/pts			2020			2019			$			%/pts
Net sales	$	505.7		$	507.3		$	(1.6	)	(0.3	)%		$	384.1		$	393.9		$	(9.8	)	(2.5	)%
Cost of products sold	349.8			346.5			3.3			1.0	%		271.9			268.1			3.8			1.4	%
Gross profit	155.9			160.8			(4.9		)	(3.0	)%		112.2			125.8			(13.6		)	(10.8	)%
Gross profit margin	30.8		%	31.7		%				(0.9)		pts	29.2		%	31.9		%				(2.7)		pts
Selling, general and administrative expenses	96.4			92.8			3.6			3.9	%		86.1			95.9			(9.8		)	(10.2	)%
Amortization of intangibles	8.6			9.4			(0.8		)	(8.5	)%		8.4			9.3			(0.9		)	(9.7	)%
Restructuring charges	2.1			1.1			1.0			90.9	%		0.3			2.7			(2.4		)	(88.9	)%
Operating income	48.8			57.5			(8.7		)	(15.1	)%		17.4			17.9			(0.5		)	(2.8	)%
Operating income margin	9.6		%	11.3		%				(1.7)		pts	4.5		%	4.5		%				0.0		pts
Interest expense	11.5			11.6			(0.1		)	(0.9	)%		8.6			10.4			(1.8		)	(17.3	)%
Interest income	(0.7		)	(1.1		)	(0.4		)	(36.4	)%		(0.3		)	(0.9		)	(0.6		)	(66.7	)%
Non-operating pension income	(1.3		)	(2.6		)	(1.3		)	(50.0	)%		(1.5		)	(1.4		)	0.1			7.1	%
Other (income) expense, net	(0.9		)	0.6			1.5			NM
Other income, net													(0.5		)	(0.2		)	0.3			150.0	%
Income before income tax													11.1			10.0			1.1			11.0	%
Income tax expense	12.2			13.4			(1.2		)	(9.0	)%		3.1			10.6			(7.5		)	(70.8	)%
Effective tax rate	30.3		%	27.3		%				3.0		pts	27.9		%	106.0		%				(78.1)		pts
Net income	28.0			35.6			(7.6		)	(21.3	)%
Net income (loss)													8.0			(0.6		)	8.6			NM
Weighted average number of diluted shares outstanding:	98.9			105.9			(7.0		)	(6.6	)%		97.5			102.3			(4.8		)	(4.7	)%
Diluted income per share	$	0.28		$	0.34		$	(0.06	)	(17.6	)%
Diluted income (loss) per share													$	0.08		$	(0.01	)	$	0.09		NM

Net Sales

Net sales ~~of $505.7~~decreased 2.5 percent to $384.1 million ~~decreased $1.6~~from $393.9 million ~~or 0.3 percent, from $507.3 million last year. The decrease reflected negative~~in 2019 due to adverse foreign exchange of ~~$9.7~~$10.6 million, or ~~1.9~~2.7 percent. The Foroni acquisition added $14.4 million. Comparable sales decreased 3.5 percent ~~partially offset~~driven by $5.7 million, or 1.1 percent, in net sales from Foroni. Excluding net sales from Foroni and foreign exchange, comparable net sales increased $2.4 million, or 0.5 percent, as higher back-to-school sales in the North America segment were partially offset by declinesweakness in the EMEA and International ~~segments.~~segments, particularly in March from COVID-19-related business closures. These declines were partially offset by growth in North America.

Cost of Products Sold

Cost of products sold includes all manufacturing, product sourcing and distribution costs, including depreciation related to assets used in manufacturing; procurement and distribution ~~process;~~process costs; allocation of certain information technology costs supporting those processes; inbound and outbound freight; shipping and handling costs; purchasing costs associated with materials and packaging used in the production processes; and inventory valuation adjustments.

~~Cost of products sold was $349.8 million, up $3.3 million, or 1.0 percent, from $346.5 million.~~ Foreign exchange reduced cost of products sold ~~$6.5~~$7.3 million, or ~~1.9 percent.~~2.7 percent and the Foroni acquisition added ~~$4.2~~$12.0 million, or ~~1.2 percent.~~4.5%. Excluding Foroni and foreign exchange, cost of products sold ~~rose primarily because~~decreased due to lower comparable net sales and cost savings, partially offset by lower levels of ~~inflationary~~fixed cost ~~increases, including tariffs.~~

absorption (primarily in the North America segment) and an unfavorable product mix (primarily in the EMEA segment).

Gross Profit

We believe that gross profit and gross profit margin provide enhanced shareholder understanding of our underlying operating profit drivers. ~~Gross profit was $155.9 million, down $4.9 million, or 3.0 percent, from $160.8 million last year. Foroni contributed $1.5 million, or 0.9 percent, while foreign~~

Foreign exchange reduced gross profit ~~$3.2~~$3.3 million, or ~~2.0 percent.~~2.6 percent and the Foroni acquisition added $2.4 million, or 1.9%. Excluding Foroni and foreign exchange, gross profit ~~and gross profit margin~~ decreased ~~primarily~~ due to ~~unfavorable product mix~~lower net comparable sales, primarily in the EMEA and ~~lower cost absorption as we reduced inventory.~~International segments.

Gross profit as a percent of net sales decreased to ~~30.8 percent from 31.7 percent for the reasons noted above.~~

~~Selling, General and Administrative Expenses~~

Selling, general and administrative expenses ("SG&A") 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 outside the manufacturing and distribution functions (e.g., finance, human resources, and information technology).

SG&A of $96.4 million increased $3.6 million, or 3.9 percent, from $92.8 million. Foroni added $1.2 million, or 1.3 percent. Foreign exchange reduced SG&A $1.7 million, or 1.8 percent. The prior-year period included $0.9 million of integration costs primarily related to Esselte. The current-year period included $1.4 million of transaction and integration costs primarily related to the Foroni Acquisition. Excluding Foroni, transaction and integration costs, and foreign exchange, SG&A increased primarily due to higher management incentive compensation expenses. SG&A as a percentage of net sales increased to 19.1 percent from 18.3 percent.

~~Operating Income~~

Operating income was $48.8 million, down $8.7 million, or 15.1 percent, from $57.5 million last year. Foreign exchange reduced operating income $1.1 million, or 1.9 percent. Foroni contributed $0.2 million, or 0.3 percent. Excluding Foroni, transaction and integration costs, restructuring charges, and foreign exchange, operating income decreased due to lower gross profit and higher SG&A expenses.

~~Interest Expense, Non-Operating Pension Income and Other (Income) Expense, Net~~

Interest expense of $11.5 million decreased $0.1 million, or 0.9 percent, from $11.6 million last year. Higher average debt outstanding and higher interest rates on our variable rate debt was offset by lower hedging cost on our intercompany loans.

Non-operating pension income of $1.3 million decreased $1.3 million, or 50.0 percent, from $2.6 million last year. The decrease was due to lower expected rates of return on plan assets in our foreign plans.

Other (income) expense, net was income of $0.9 million compared to expense of $0.6 million in the same period last year. The increase in income was due to a gain from the release of reserves no longer required for certain operating taxes related to a pre-acquisition period for GOBA and lower foreign exchange losses this year.

~~Income Tax Expense~~

Income tax expense was $12.2 million on income before taxes of $40.2 million, or an effective tax rate of 30.3 percent. Last year income tax expense was $13.4 million on income before taxes of $49.0 million, or an effective tax rate of 27.3 percent. The higher effective tax rate this year was primarily due to $1.6 million in Brazilian income taxes accrued on a contingent gain related to the Brazil Tax Credits.

~~See "Note 18. Commitments and Contingencies -~~ ~~Brazil Tax Credits" to the condensed consolidated financial statements contained in Item 1. of this report for additional details on the Brazil Tax Credits.~~

~~Net Income/Diluted Income per Share~~

Net income was $28.0 million, down $7.6 million, or 21.3 percent, from $35.6 million last year. Foreign exchange reduced net income $0.7 million, or 2.0 percent. Diluted income per share was $0.28 compared with $0.34 last year. Excluding Foroni, transaction and integration costs, restructuring charges, and foreign exchange, net income decreased due to lower gross profit and higher SG&A expenses. Diluted income per share benefited from fewer outstanding shares.

~~Segment Net Sales and Operating Income for the Three Months Ended September 30, 2019 and September 30, 2018~~

Three Months Ended September 30, 2019 Amount of Change Compared to the Three Months Ended September 30, 2018
Net Sales Segment Operating Income (A) Segment Operating Income Margin Net Sales Net Sales Segment Operating Income (A) Segment Operating Income Margin Points

(in millions) $ % $ %
ACCO Brands North America $ 272.4
$ 33.7
12.4 % $ 9.0
3.4% $ —
— % (40 )
ACCO Brands EMEA 133.1
13.8
10.4 % (10.0 ) (7.0)% (0.8 ) (5.5 )% 20
ACCO Brands International 100.2
10.8
10.8 % (0.6 ) (0.6)% (5.3 ) (32.9 )% (520 )
Total $ 505.7
$ 58.3
$ (1.6 ) $ (6.1 )

Three Months Ended September 30, 2018
Net Sales Segment Operating Income (A) Segment Operating Income Margin

(in millions)
ACCO Brands North America $ 263.4
$ 33.7
12.8 %
ACCO Brands EMEA 143.1
14.6
10.2 %
ACCO Brands International 100.8
16.1
16.0 %
Total $ 507.3
$ 64.4

~~(A) Segment operating income excludes corporate costs. See "Part I, Item 1.Note 17. Information on Business Segments," for a reconciliation of total "Segment operating income" to "Income before income tax."~~

~~ACCO Brands North America~~

Net sales were $272.4 million, up $9.0 million, or 3.4 percent, from $263.4 million last year. Unfavorable foreign exchange reduced net sales $0.2 million, or 0.1 percent. Excluding foreign exchange, comparable net sales increased 3.5 percent, largely due to strong back-to-school sales. Net sales benefited from price increases, including on back-to-school items that were partially offset by lower volume.

Operating income was $33.7 million, flat with last year. Operating income margin decreased to 12.4 percent from 12.8 percent. The margin decrease was a result of an unfavorable product mix, lower cost absorption from reducing inventory, higher management incentive compensation expenses and higher restructuring charges.

Tariffs on finished goods we import from China increased in May 2019. This negatively impacted our cost of products sold in the third quarter of 2019. We raised prices in August to offset the impact of these increased tariffs. Additional tariffs became effective in September 2019, which will negatively impact our cost of products sold during the fourth quarter and beyond. An additional tariff rate increase is currently expected to take effect in December 2019. We intend to continue to increase our sales prices to recover any increased costs from tariffs, which may result in a decrease in sales volume. In such circumstances, the impact of increased tariffs on cash flow and cost of products sold is likely to occur before we see the benefit of our price increases because of our contractual obligations to provide our customers with advance notice of price increases.

~~ACCO Brands EMEA~~

Net sales were $133.1 million, down $10.0 million, or 7.0 percent, from $143.1 million last year. The decrease was primarily due to foreign exchange, which reduced net sales $6.7 million, or 4.7 percent. Excluding foreign exchange, comparable net sales decreased 2.3 percent, primarily due to reduced demand from customers in a slowing economic environment.

Operating income was $13.8 million, down $0.8 million, or 5.5 percent, from $14.6 million last year, but operating income margin increased slightly to 10.4 percent from 10.2 percent. Foreign exchange reduced operating income $0.7 million, or 4.8 percent. The current-year period included only $0.1 million of restructuring charges, while the same period last year included $2.2 million of restructuring charges and integration costs primarily related to Esselte. Excluding foreign exchange, restructuring charges and integration costs, operating income decreased as lower comparable net sales and higher input costs were only partially offset by lower management incentive compensation expenses.

~~ACCO Brands International~~

Net sales were $100.2 million, down $0.6 million, or 0.6 percent, from $100.8 million last year. Foroni contributed net sales of $5.7 million, or 5.7 percent. Unfavorable foreign exchange reduced net sales $2.8 million, or 2.8 percent. Excluding Foroni and foreign exchange, comparable net sales decreased 3.5 percent. The decline was mainly due to lost placements in Australia and lower back-to-school sales in Mexico, and lower sales in Asia as a result of exiting our commodity filing business, partially offset by growth in Brazil.

Operating income was $10.8 million, down $5.3 million, or 32.9 percent, from $16.1 million last year. Operating income included $0.2 million from Foroni. Foreign exchange reduced operating income $0.4 million, or 2.5 percent. Operating margin decreased to 10.8 percent from 16.0 percent. Excluding Foroni and foreign exchange, operating income decreased primarily due to lower gross profit margin driven by inflationary cost increases and expenses related to our commodity filing business exit in Asia.

~~Consolidated Results of Operations for the Nine Months Ended~~ ~~September 30, 2019~~ ~~and~~ ~~September 30, 2018~~

Nine Months Ended September 30, Amount of Change
(in millions, except per share data) 2019 2018 $ %/pts
Net sales $ 1,418.3
$ 1,411.9
$ 6.4
0.5 %
Cost of products sold 970.8
961.2
9.6
1.0 %
Gross profit 447.5
450.7
(3.2 ) (0.7 )%
Gross profit margin 31.6 % 31.9 % (0.3)
pts
Selling, general and administrative expenses 287.8
294.6
(6.8 ) (2.3 )%
Amortization of intangibles 26.8
27.2
(0.4 ) (1.5 )%
Restructuring charges 4.8
7.9
(3.1 ) (39.2 )%
Operating income 128.1
121.0
7.1
5.9 %
Operating income margin 9.0 % 8.6 % 0.4
pts
Interest expense 33.6
30.9
2.7
8.7 %
Interest income (2.9 ) (3.5 ) (0.6 ) (17.1 )%
Non-operating pension income (4.1 ) (7.1 ) (3.0 ) (42.3 )%
Other expense, net 0.1
1.6
(1.5 ) (93.8 )%
Income tax expense 38.1
27.4
10.7
39.1 %
Effective tax rate 37.6 % 27.6 % 10.0
pts
Net income 63.3
71.7
(8.4 ) (11.7 )%
Weighted average number of diluted shares outstanding: 101.9
107.9
(6.0 ) (5.6 )%
Diluted income per share $ 0.62
$ 0.66
$ (0.04 ) (6.1 )%

~~Net Sales~~

Net sales were $1,418.3 million, up $6.4 million, or 0.5 percent, from $1,411.9 million last year. Unfavorable foreign exchange reduced net sales $45.4 million, or 3.2 percent. Net sales benefited from the additional six months for GOBA and two months for Foroni that contributed $23.7 million and $5.7 million, respectively, or a total of 2.1 percent. Excluding foreign exchange and net sales from GOBA and Foroni, comparable net sales increased $22.4 million, or 1.6 percent, as growth in the North America segment was partially offset by declines, primarily in the International segment.

~~Cost of Products Sold~~

Cost of products sold was $970.8 million, up $9.6 million, or 1.0 percent, from $961.2 million last year. GOBA and Foroni added $19.8 million, or 2.1 percent. Foreign exchange reduced cost of products sold $30.9 million, or 3.2 percent. Excluding GOBA, Foroni, and foreign exchange, cost of products sold increased due to cost increases, primarily in North America from inflationary cost increases and tariffs, partially offset by productivity and cost savings.

~~Gross Profit~~

Gross profit was $447.5 million, down $3.2 million, or 0.7 percent, from $450.7 million last year. GOBA and Foroni contributed $9.6 million, or 2.1 percent. Foreign exchange reduced gross profit $14.5 million, or 3.2 percent, in 2019. Excluding GOBA, Foroni, and foreign exchange, gross profit increased, primarily from higher net sales in the North America segment.

~~Gross profit as a percent of net sales decreased to 31.6~~29.2 percent from 31.9 ~~percent.~~percent, with 50 basis points of the decline attributable to Foroni. Excluding ~~the acquisitions~~Foroni and foreign exchange, gross profit margin declined in ~~both~~all segments, primarily due to lower levels of fixed cost absorption (primarily in the North America segment) and an unfavorable product mix (primarily in the EMEA ~~and~~segment). International ~~segments.~~segment gross profit margin was flat.

Selling, General and Administrative Expenses ("SG&A")

~~SG&A was $287.8 million, down $6.8 million, or 2.3 percent, from $294.6 million last year. GOBA and Foroni contributed $4.5 million, or 1.5 percent.~~ Foreign exchange reduced SG&A ~~$9.1~~$1.9 million, or ~~3.1 percent.~~2.0 percent and the Foroni acquisition added $2.2 million, or 2.3%. The current year includes ~~$1.9~~$0.3 million of ~~transaction~~integration and ~~integration~~transaction costs related to the Foroni ~~Cumberland asset and GOBA acquisitions.~~acquisition. The prior-year period included ~~$4.4~~$0.4 million in integration costs related ~~primarily~~ to ~~Esselte.~~prior acquisitions. Excluding ~~GOBA,~~ Foroni, ~~transaction~~integration and ~~integration~~transaction costs, and foreign exchange, SG&A ~~was flat.~~declined due to $7 million in lower incentive accruals and cost savings.

SG&A as a percentage of net sales decreased to ~~20.3 percent~~22.4% from ~~20.9 percent~~24.3% last year, primarily due to ~~higher net sales.~~the reasons mentioned above. Foroni accounted for 30 basis points of the decrease.

Restructuring Charges

Restructuring charges were ~~$4.8~~$0.3 million, down ~~$3.1~~$2.4 million from ~~$7.9~~$2.7 million last year. The current-year charges related to ~~severance~~incremental costs associated with cost reduction ~~initiatives~~programs initiated at the end of 2019 in all of our segments. The prior year charges related to severance costs associated with additional changes in the operating structure of our North America and International segments. ~~The prior-year charges primarily related to Esselte integration activities, and changes in the operating structure of the North America segment.~~

Operating Income

Operating income was ~~$128.1~~$17.4 million, ~~up $7.1~~a decrease of $0.5 million, ~~or 5.9 percent,~~ from ~~$121.0~~$17.9 million ~~last year. GOBA and~~in 2019, primarily due to lower comparable sales from the impact of COVID-19-related business closures. The Foroni ~~contributed $4.2 million, or 3.5 percent.~~acquisition was immaterial. Foreign exchange reduced operating income ~~$4.1~~$1.2 million ~~or 3.4 percent. Excluding GOBA~~ and ~~Foroni,~~lower restructuring charges transaction and integration costs, and foreign exchange, operating income increased primarily due to higher net sales in North America and productivity and cost savings, which more than offset net sales declines in the International segment, as well as unfavorable product mix.were a $2.4 million benefit.

Interest Expense ~~and Non-Operating Pension Income~~

~~Interest~~The decrease in interest expense ~~was $33.6~~of $1.8 million, ~~up $2.7 million, or 8.7 percent, from $30.9 million last year. The increase~~ was primarily due to ~~higher~~lower average debt outstanding and ~~higher~~lower interest rates on our variable rate debt.

Non-operating pension income was $4.1 million, down $3.0 million, or 42.3 percent, from $7.1 million in 2018. The decrease was due to lower expected rates of return on plan assets in our foreign plans.

Income Tax Expense

Income tax expense was ~~$38.1~~$3.1 million on income before taxes of ~~$101.4~~$11.1 million, or an effective tax rate of ~~37.6~~27.9 percent. The decrease in effective tax rate for the period was primarily due to a reduction in nondeductible interest expense in the current year, and an increase in reserves for uncertain tax positions in the prior year.

For the prior year, income tax expense was $10.6 million on income before taxes of $10.0 million, or an effective tax rate of 106.0 percent. The high effective tax rate for the prior-year period was due to recording of (i) additional reserves for uncertain tax positions related to the Brazil Tax Assessments ($5.6 million), ~~the recording of~~(ii) deferred state taxes on unremitted non-U.S. earnings ($0.8 million) and ~~the recording of~~(iii) reserves related to various tax ~~contingencies, and additional taxes of $1.6 million in Brazilian income taxes accrued on a contingent gain related to the Brazil Tax Credits.~~

contingencies. The increase of $5.6 million in the reserve related to uncertain tax positions in connection with the Brazil Tax Assessments was recorded in the first quarter of 2019, although the increase should have been recorded in 2018 when we decided to appeal an administrative decision to the judicial level.

For the prior year, income tax expense was $27.4 million on income before taxes of $99.1 million, or an effective tax rate of 27.6 percent. The low effective tax rate was primarily due to a $5.6 million benefit resulting from the partial release of the reserve for the Brazil Tax Assessments due to the expiration of the statute of limitations for the 2011 tax year.

See "Note 11. Income Taxes - Brazil Tax Assessments" to the condensed consolidated financial statements contained in Item 1. of this report for additional details on the Brazil Tax Assessments. ~~See "Note 18. Commitments and Contingencies -~~ ~~Brazil Tax Credits" to the condensed consolidated financial statements contained in Item 1. of this report for additional details on the Brazil Tax Credits.~~

Net Income/Diluted Income per Share

Net income was ~~$63.3 million down $8.4~~$8.0 million, or ~~11.7 percent, from $71.7 million last year. Foreign exchange reduced~~$0.08 per share, compared with a net ~~income $2.0~~loss in 2019 of $(0.6) million, or ~~2.8 percent. Diluted income~~$(0.01) per share, ~~was $0.62, compared with $0.66 last year. Excluding GOBA, Foroni,~~because of an unusually high tax rate and higher restructuring charges ~~transaction~~ and integration and transaction costs ~~and foreign exchange, net income decreased primarily due to higher income tax and interest expense, partially offset by higher operating income.~~in 2019. Diluted income per share benefited from fewer outstanding shares.

Segment Net Sales and Operating Income for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2020 and March 31, 2019 ~~and September 30, 2018~~


	Nine Months Ended September 30, 2019									Amount of Change Compared to the Nine Months Ended September 30, 2018															Three Months Ended March 31, 2020											Amount of Change Compared to the Three Months Ended March 31, 2019
	Net Sales		Segment Operating Income (A)				Segment Operating Income Margin			Net Sales				Net Sales		Segment Operating Income (A)				Segment Operating Income			Margin Points		Net Sales				Segment Operating Income (A)				Segment Operating Income Margin			Net Sales				Net Sales		Segment Operating Income (A)				Segment Operating Income			Margin Points

(in millions)						$							%			$				%												$				%		$				%
ACCO Brands North America	$	740.7				$			101.1			13.6	%		$	28.9			4.1%		$	13.0			14.8	%		120				$			167.8			$	7.6			4.5	%		$	7.4			4.6%		$	0.8			11.8	%	30
ACCO Brands EMEA	407.9				37.1						9.1	%		(30.2		)		(6.9)%		—				—	%		60		127.5				12.0				9.4	%		(19.0		)		(13.0)%		(3.9		)		(24.5	)%		(150	)
ACCO Brands International	269.7		20.5				7.6	%		7.7				2.9%		(4.7		)		(18.7	)%		(200	)	88.8				5.9				6.6	%		1.8				2.1%		0.3				5.4	%		20
Total	$	1,418.3	$	158.7						$	6.4					$	8.3								$	384.1			$	25.5						$	(9.8	)				$	(2.8	)

	Nine Months Ended September 30, 2018																								Three Months Ended March 31, 2019
	Net Sales		Segment Operating Income (A)				Segment Operating Income Margin																		Net Sales				Segment Operating Income (A)				Segment Operating Income Margin

(in millions)
ACCO Brands North America	$	711.8			$	88.1					12.4	%																			$	160.4					$	6.8			4.2	%
ACCO Brands EMEA	438.1				37.1						8.5	%																			146.5						15.9				10.9	%
ACCO Brands International	262.0		25.2				9.6	%																		87.0					5.6				6.4	%
Total	$	1,411.9	$	150.4																						$	393.9				$	28.3

(A) Segment operating income excludes corporate costs. See "Part I, Item 1. Note 17. Information on Business ~~Segments,"~~Segments" for a reconciliation of total "Segment operating income" to "Income before income tax."

ACCO Brands North America

Net sales ~~were $740.7 million, up $28.9 million, or 4.1 percent,~~and comparable sales increased from ~~$711.8 million last year.~~higher pricing and included growth in Kensington^®, Swingline^®, Quartet^®, and Five Star^® brands. Unfavorable foreign exchange reduced net sales ~~$2.5~~$0.2 million, or ~~0.4~~0.1 percent. Excluding foreign exchange, comparable net sales increased 4.5 percent, largely due to a strong back-to-school season, benefit from price increases, including on back-to-school items that were partially offset by volume declines, including lost placements.

Operating income ~~was $101.1 million, up $13.0 million, or 14.8 percent, from $88.1 million last year. Operating income~~and operating margin increased due to ~~13.6 percent from 12.4 percent. Operating income and margin increased because~~lower restructuring charges in the current year. The benefits of higher ~~net~~ sales and ~~productivity~~lower SG&A from reduced incentive accruals were offset by adverse gross margin due to lower fixed cost absorption, unfavorable product and ~~cost savings.~~customer mix, and increased reserves for obsolete inventory.

ACCO Brands EMEA

Net sales ~~were $407.9 million, down $30.2 million, or 6.9 percent, from $438.1 million last year due to~~and comparable sales declined primarily as the result of COVID-19-related customer closures in March. Unfavorable foreign exchange ~~which~~ reduced net sales ~~$29.1~~$4.3 million, or ~~6.6~~2.9 percent. ~~Excluding foreign exchange, comparable net sales decreased 0.3 percent.~~

Operating income ~~was $37.1 million, even with last year.~~and operating margin both declined primarily due to lower sales. In addition, gross margin also declined due to lower fixed cost absorption and the impact of the stronger U.S. dollar on purchased Asian-sourced products partially offset by cost savings, including lower incentive accruals. Foreign exchange reduced operating income ~~$2.8~~$0.5 million, or ~~7.5~~3.1 percent. Operating income margin increased to 9.1 percent from 8.5 percent. Excluding foreign exchange, operating income increased primarily due to $7.0 million in lower restructuring charges and integration costs, and savings from those prior year actions, partially offset by lower net sales.

ACCO Brands International

Net sales ~~were $269.7 million, up $7.7~~increased as a result of the Foroni acquisition which added $14.4 million, or ~~2.9~~16.6 percent, ~~from $262.0 million last year. The GOBA and Foroni acquisitions contributed net sales of $23.7 million and $5.7 million, respectively, or a total of 11.2 percent. Unfavorable~~partially offset by unfavorable foreign exchange ~~reduced net sales $13.8~~of $6.1 million, or ~~5.3~~7.0 percent. Excluding ~~GOBA,~~ Foroni and foreign exchange, comparable net sales decreased ~~3.0~~$6.5 million, or 7.5 percent, primarily due to ~~lower~~slowing demand ~~including lost placements~~due to COVID-19-related business closures and supply chain disruptions in ~~Australia. In our other territories, comparable net sales grew in Brazil, were flat in Mexico, and declined in Asia as we exited our commodity filing business.~~China.

~~Operating income was $20.5 million, down $4.7 million, or 18.7 percent, from $25.2 million last year. GOBA and Foroni contributed $4.2 million, or 16.7 percent. Foreign~~Adverse foreign exchange reduced operating income ~~$1.0~~$0.7 million, or ~~4.0~~12.5 percent. ~~Operating income margin decreased to 7.6 percent from 9.6 percent.~~Foroni contributed an immaterial operating loss. Excluding ~~GOBA,~~ Foroni and foreign exchange, operating income ~~decreased primarily~~increased due to lower ~~comparable net sales, and lower gross profit margin driven by unfavorable product mix and foreign-exchange-related-inflation. In addition, the segment was impacted by higher~~ restructuring charges ~~as well as expenses associated with our commodity filing business exit in Asia.~~and SG&A, including reduced incentive accruals, partially offset by lower sales due to COVID-19.

~~SUPPLEMENTAL NON-GAAP FINANCIAL MEASURE~~Supplemental Non-GAAP Financial Measure

To supplement our condensed consolidated financial statements presented in accordance with generally accepted accounting principles in the U.S. ("GAAP"), we provide investors with ~~the~~certain non-GAAP financial ~~measurement entitled "comparable~~measures, including comparable net sales." Comparable net sales represents net sales excluding the impact of acquisitions and with current-period foreign operation sales translated at prior-year currency rates.

~~We provide the comparable net sales measurement to facilitate comparisons of our historical sales results as well as to highlight the underlying sales trends in our business.~~ We use comparable net sales both to explain our results to stockholders and the investment community and in the internal evaluation and management of our business. We believe ~~this measure provides~~comparable net sales provide management and investors with a more complete understanding of our underlying ~~sales~~operational results and trends, facilitate meaningful period-to-period comparisons and ~~enhances the~~enhance an overall understanding of our past ~~sales performance~~ and ~~our prospects.~~

future financial performance. We ~~calculate~~sometimes refer to comparable net sales ~~by excluding the effect of acquisitions and by translating the current-period foreign operation~~as comparable sales. Comparable net sales ~~at prior-year currency rates.~~

should not be considered in isolation or as a substitute for, or superior to, the directly comparable GAAP financial measure and should be read in connection with the Company's financial statements presented in accordance with GAAP.

The following tables provide a reconciliation of GAAP net sales change as reported to non-GAAP comparable net sales change:


	Amount of Change - Three Months Ended September 30, 2019 compared to the Three Months Ended September 30, 2018					Amount of Change - Three Months Ended March 31, 2020 compared to the Three Months Ended March 31, 2019
	$ Change - Net Sales					$ Change - Net Sales
		Non-GAAP					Non-GAAP
	GAAP				Comparable	GAAP				Comparable
	Net Sales		Currency		Net Sales	Net Sales		Currency		Net Sales
(in millions)	Change		Translation	Acquisition	Change	Change		Translation	Acquisition	Change
ACCO Brands North America	$9.0		$(0.2)	$—	$9.2	$7.4		$(0.2)	$—	$7.6
ACCO Brands EMEA	(10.0)		(6.7)	—	(3.3)	(19.0)		(4.3)	—	(14.7)
ACCO Brands International	(0.6)		(2.8)	5.7	(3.5)	1.8		(6.1)	14.4	(6.5)
Total	$(1.6)		$(9.7)	$5.7	$2.4	$(9.8)		$(10.6)	$14.4	$(13.6)

	% Change - Net Sales					% Change - Net Sales
		Non-GAAP					Non-GAAP
	GAAP				Comparable	GAAP				Comparable
	Net Sales		Currency		Net Sales	Net Sales		Currency		Net Sales
	Change		Translation	Acquisition	Change	Change		Translation	Acquisition	Change
ACCO Brands North America	3.4%		(0.1)%	—%	3.5%	4.6%		(0.1)%	—%	4.7%
ACCO Brands EMEA	(7.0)%		(4.7)%	—%	(2.3)%	(13.0)%		(2.9)%	—%	(10.1)%
ACCO Brands International	(0.6)%		(2.8)%	5.7%	(3.5)%	2.1%		(7.0)%	16.6%	(7.5)%
Total	(0.3)%		(1.9)%	1.1%	0.5%	(2.5)%		(2.7)%	3.7%	(3.5)%

	Amount of Change - Nine Months Ended September 30, 2019 compared to the Nine Months Ended September 30, 2018
	$ Change - Net Sales
		Non-GAAP
	GAAP				Comparable
	Net Sales		Currency		Net Sales
(in millions)	Change		Translation	Acquisition	Change
ACCO Brands North America	$28.9		$(2.5)	$—	$31.4
ACCO Brands EMEA	(30.2)		(29.1)	—	(1.1)
ACCO Brands International	7.7		(13.8)	29.4	(7.9)
Total	$6.4		$(45.4)	$29.4	$22.4

	% Change - Net Sales
		Non-GAAP
	GAAP				Comparable
	Net Sales		Currency		Net Sales
	Change		Translation	Acquisition	Change
ACCO Brands North America	4.1%		(0.4)%	—%	4.5%
ACCO Brands EMEA	(6.9)%		(6.6)%	—%	(0.3)%
ACCO Brands International	2.9%		(5.3)%	11.2%	(3.0)%
Total	0.5%		(3.2)%	2.1%	1.6%

Liquidity and Capital Resources

Our primary liquidity needs are to service indebtedness, fund capital expenditures, fund our acquisition strategy 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 $600 million multi-currency revolving credit facility (the "Revolving Facility"). As of ~~September 30, 2019,~~March 31, 2020, there ~~were $132.4~~was $137.4 million in borrowings outstanding under ~~our~~the Revolving Facility ($30.7 million reported in "Current portion of long-term debt" and $106.7 million reported in "Long-term debt, net") and the amount available for borrowings was ~~$454.8~~$450.1 million (allowing for ~~$12.8~~$12.5 million of letters of credit outstanding on that date). We maintain adequate financing arrangements at market rates.

~~Because~~We are in a strong financial position with $93.4 million cash on hand and $450.1 million available for borrowings under our $600 million Revolving Facility as of the ~~seasonality~~end of the first quarter. We also recently amended our ~~business, we typically generate much of our cash flow~~bank debt maintenance covenant increasing the net debt to EBITDA leverage ratio to 4.75x from operating activities in the third and fourth quarters, as accounts receivables are collected, and we typically use cash in the second quarter to fund working capital in order to support the North America back-to-school season. We had a different cash flow pattern in the nine months of 2019, with a large operating cash outflow in3.75x through the first quarter ending after June 30, 2021. This will provide us additional financial flexibility to cover the anticipated financial impact of COVID-19 should we need it. As of March 31, 2020, our net leverage ratio was 2.8x. We have no debt maturities before May 2024. We also recently announced that we do not intend to repurchase additional shares during 2020. Our planned use of cash for the remainder of 2020, after funding operating needs, will be to pay dividends and ~~a smaller outflow~~reduce debt.

Given our financial strength, we currently expect to be able to maintain adequate liquidity as we manage through the current environment. We also believe that our seasonal borrowings could be larger because the lower sales in April will result in lower collections from accounts receivables in the ~~second quarter which resulted~~quarter.

Likewise, we are monitoring our working capital, including our accounts receivable and inventory, closely. We anticipate an increased level of late payments and potential bad debts as our customers deal with the COVID-19 impacts on their businesses from the prolonged period of closure. We are actively managing our ~~decision~~accounts receivables and will potentially restrict our own sales to ~~purchase raw materials and~~mitigate our risk. In addition, we did not anticipate such a steep drop in demand when we placed orders for purchased finished goods ~~inventory~~ earlier ~~than normal to secure supply and partially mitigate the effect of anticipated inflation and tariffs. As expected and as shown below,~~ in the ~~third quarter~~year, which is likely to result in elevated inventory levels at the end of ~~2019 we generated significantly higher operating cash inflow than we did last year, due to reduced payments for inventory.~~the second quarter.

~~Summary~~The $538.5 million of ~~Cash Flow by Quarter~~debt currently outstanding under our senior secured credit facilities has a weighted average interest rate of 1.95 percent as of March 31, 2020, and ~~Year-to-Date for 2019 and 2018:~~

2019
1st Quarter 2nd Quarter 3rd Quarter Year-to-Date
Net cash (used) provided by operating activities $ (61.3 ) $ (54.4 ) $ 190.8
$ 75.1

Net cash (used) by investing activities: (12.5 ) (7.1 ) (49.5 ) (69.1 )

Net cash provided (used) by financing activities: 107.6
54.3
(196.0 ) (34.1 )
Effect of foreign exchange rate changes on cash and cash equivalents (0.3 ) 0.8
(1.7 ) (1.2 )
Net increase (decrease) in cash and cash equivalents $ 33.5
$ (6.4 ) $ (56.4 ) $ (29.3 )

2018
1st Quarter 2nd Quarter 3rd Quarter Year-to-Date
Net cash provided (used) by operating activities $ 60.4
$ (66.9 ) $ 91.2
$ 84.7

Net cash (used) by investing activities: (8.0 ) (9.0 ) (46.4 ) (63.4 )

Net cash (used) provided by financing activities: (7.0 ) 99.1
(88.2 ) 3.9
Effect of foreign exchange rate changes on cash and cash equivalents 0.4
(6.7 ) (0.8 ) (7.1 )
Net increase (decrease) in cash and cash equivalents $ 45.8
$ 16.5
$ (44.2 ) $ 18.1

$375.0 million outstanding principal amount of our senior unsecured notes (the "Senior Unsecured Notes") has a fixed interest rate of 5.25 percent.

Consolidated cash and cash equivalents were $93.4 million as of March 31, 2020, approximately $53 million of which was held in Brazil. Our Brazilian businesses ~~are also~~is highly seasonal due to the timing of the back-to-school season, which coincides 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; therefore, our normal practice is to hold seasonal cash requirements in Brazil, and invest it in short-term Brazilian government securities. Consolidated cash and cash equivalents were $37.7 million as of September 30, 2019, approximately $9 million of which was held in Brazil. In the third quarter of 2019 we used US$42.1 million of Brazil's cash on hand to fund the Foroni Acquisition.

~~Our priorities for~~Adequacy of Liquidity Sources

We believe that cash flow ~~use over~~from operations, our current cash balance and other sources of liquidity, including borrowings available under our Revolving Facility, will be adequate to support our requirements for working capital, capital and restructuring expenditures and to service indebtedness for the ~~near term, after funding business operations, including restructuring expenses, are funding strategic acquisitions, reducing debt, paying dividends and repurchasing shares.~~

~~The current senior secured credit facilities have a weighted average interest rate of 2.61 percent as of September 30, 2019 and our senior unsecured notes have a fixed interest rate of 5.25 percent.~~foreseeable future.

Restructuring and Integration Activities

From time to time the Company may implement restructuring, realignment or cost-reduction plans and activities, including those related to integrating acquired businesses.

During the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, the Company recorded ~~$2.1 million and $4.8~~$0.3 million in restructuring expenses ~~respectively, primarily~~ related to ~~additional changes in~~incremental costs associated with cost reduction programs initiated at the ~~operating structure~~end of ~~the North America segment.~~2019. For additional details, see "Note 10. Restructuring" to the condensed consolidated financial statements contained in "Part I, Item 1. Financial Information" of this ~~report.~~Quarterly Report on Form 10-Q.

In addition, during the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, the Company recorded an aggregate ~~$1.4~~$0.3 million ~~and $1.9 million, respectively,~~ in non-restructuring integration expenses related to the integration of ~~recent acquisitions~~Foroni with ACCO ~~Brands operations.~~Brands' operations in Brazil.

Cash Flow for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2020 and March 31, 2019 ~~and September 30, 2018~~

Cash Flow from Operating Activities

Cash ~~sourced~~used from operating activities during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 of ~~$75.1~~$25.2 million was ~~$9.6~~$36.1 million less than the ~~$84.7~~$61.3 million ~~sourced~~used in the ~~2018~~2019 period. The ~~decrease resulted~~reduction in cash used from ~~income tax payments which were $14.1 million higher and higher~~operating activities was primarily the result of reductions in our working capital requirements ~~(accounts receivable, inventories,~~during the first quarter of 2020 driven primarily by a reduction in accounts payable and ~~accounts payable) in 2019~~inventory compared to ~~2018,~~the prior year’s first quarter. The decrease in working capital requirements was partially offset by ~~lower customer incentive~~an increase in our net income and ~~employee incentive payments.~~changes to our accrued expenses compared to the first quarter of 2019.

The table below shows our cash flow used or provided by accounts receivable, inventories and accounts payable for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:


	Nine Months Ended						Amount of Change			Three Months Ended						Amount of Change
(in millions)	September 30, 2019			September 30, 2018			Amount of Change			March 31, 2020			March 31, 2019			Amount of Change
Accounts receivable	$	54.0		$	46.2		7.8			$	112.0		$	108.1		$	3.9
Inventories	34.8			(81.2		)	116.0			(26.2		)	(57.3		)	31.1
Accounts payable	(102.1		)	39.1			(141.2		)	(45.2		)	(79.9		)	34.7
Cash flow (used) provided by net working capital	$	(13.3	)	$	4.1		$	(17.4	)
Cash flow provided (used) by net working capital										$	40.6		$	(29.1	)	$	69.7

~~Inventories generated $34.8~~Accounts receivable was a source of cash of $112.0 million ~~in 2019,~~during the first quarter of 2020, a favorable change of ~~$116.0~~$3.9 million compared to a source of cash of $108.1 million during the first quarter of 2019. The $3.9 million improvement resulted from improved collections and lower sales during the first quarter of 2020.

Inventories was a use of cash of $26.2 million during the first quarter of 2020, a favorable change of $31.1 million when compared with the ~~$81.2~~$57.3 million used induring the ~~prior year. Inventory~~first quarter of 2019. The use of cash for inventory was higher ~~at year end~~during the first quarter of 2019 as a result of the Company acquiring additional inventory during the fourth quarter of 2018 ~~following advanced purchases of materials~~ to secure supply and to partially reduce the anticipated inflation ~~including~~and avoid import tariffs ~~which have continued to inflate the value of~~that went into effect during 2019. The inventory ~~held. As a consequence, incremental purchases~~build-up was not repeated in ~~2019 were lower than the prior year and inventory levels are now similar to our seasonal normal although reflecting inflation.~~2019.

•

Accounts payable ~~used $102.1~~was a use of cash of $45.2 million ~~in 2019, an adverse~~during the first quarter of 2020, a favorable change of ~~$141.2~~$34.7 million when compared ~~with the $39.1 million contributed in 2018. This was due~~ to a ~~cycle~~use of ~~earlier~~cash of $79.9 million during the first quarter of 2019. The use of cash for accounts payable was higher during the first quarter of 2019 as a result of the Company paying for the additional inventory ~~purchases which occurred in~~that was acquired during the fourth quarter of 2018 ~~that resulted in unusually high payables at 2018 year end (and higher payments earlier in 2019).~~as noted above~~Incremental purchases in the third quarter of 2019 were lower than the prior year as inventory was consumed.~~.

Accounts receivable contributed $54.0 million in 2019, compared to a contribution of $46.2 million in the prior year. The $7.8 million improvement resulted from strong third quarter back-to-school collections in North America, partially offset by lower 2018 year-end accounts receivable which reduced collections in early 2019.

~~Income tax payments were $14.1 million higher than a year ago due tointernational tax payments in 2018 that were reduced by the use of tax losses accumulated in prior years, and deferred payments related to legal entity reorganizations.~~ Partially offsetting the adverse change in cash flow from income tax and working capital were lower payments of customer incentives, primarily due to the settlement of disputed amounts which occurred in the prior year; and, payments ofCash used for annual and long-term employee incentive payments induring the first quarter of ~~2019 that were $12~~2020 was approximately $7.0 million ~~lower than those in~~higher during the first quarter of 2020 compared to the prior ~~year.~~year’s first quarter due to higher achievement of annual performance objectives for 2019.

Cash Flow from Investing Activities

Cash used by investing activities was ~~$69.1~~$6.3 million and ~~$63.4~~$12.5 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. The 2020 cash used included $0.6 million of purchase price adjustment received for working capital adjustments for the Foroni Acquisition in Brazil. The 2019 cash outflow included ~~$42.1 million of preliminary purchase price paid for the Foroni Acquisition in Brazil and $5.2~~$5.4 million of purchase price paid to ~~acquire~~date for the acquisition of certain ~~Cumberland~~ assets ~~in Australia, and is net of receipt~~ of the final purchase price adjustment associated with the GOBA Acquisition. The 2018 cash outflow included $37.3 million of preliminary purchase price, net of cash acquired, paid for GOBA. For further details, see "Note 3. Acquisitions" to the condensed consolidated financial statements containedCumberland brand in ~~Item 1. of this report.~~Australia. Capital expenditures were ~~$21.9~~$6.9 million and ~~$26.3~~$7.2 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively.

Cash Flow from Financing Activities

Cash ~~used~~provided by financing activities was ~~$34.1~~$99.2 million for the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, compared with ~~$3.9~~$107.6 million provided by financing activities for the same period of ~~2018.~~2019. Cash ~~used~~provided in ~~2019~~2020 includes ~~$58.0~~incremental net borrowings of $124.5 million, partially offset by $19.1 million for repurchases of our common stock, payments related to tax withholding for stock-based compensation, net of proceeds received from the exercise of stock options, and ~~$18.1~~$6.2 million for the payment of dividends to ~~stockholders, partially offset by~~stockholders.

Cash provided during the first quarter of 2019 includes incremental net borrowings of ~~$45.3 million.~~

~~Cash provided by financing activities for the nine months ended September 30, 2018, was $3.9~~$123.7 million, ~~and reflects incremental net borrowings of $99.1 million. This was~~ partially offset by ~~$75.7~~$14.7 million for repurchases of our common stock and payments related to tax withholding for stock-based compensation, ~~net of proceeds received from the exercise of stock options,~~ and ~~$18.9~~$6.2 million for the payment of dividends to stockholders.

Credit Facilities and Notes Covenants

As of and for the periods ended ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the Company was in compliance with all applicable loan covenants.

Guarantees and Security

Generally, obligations under the Credit Agreement are guaranteed by certain of the Company’s existing and future subsidiaries, and are secured by substantially all of the Company’s and certain guarantor subsidiaries’ assets, subject to certain exclusions and limitations.

~~Adequacy of Liquidity Sources~~

We believe that cash flow from operations, our current cash balance and other sources of liquidity, including borrowings available under our Revolving Facility, will be adequate to support our requirements for working capital, capital and restructuring expenditures and to service indebtedness for the foreseeable future.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See "Part II, Item 7A. Quantitative and Qualitative Disclosures about Market Risk" of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019. There have been no material changes to Foreign Exchange Risk Management or Interest Rate Risk Management in the quarter ended ~~September 30, 2019~~March 31, 2020 or through the date of this report.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures.

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation under the supervision of the Chief Executive Officer and the Chief Financial Officer, and with the participation of our Disclosure Committee, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of ~~September 30, 2019.~~March 31, 2020.

(b) Changes in Internal Control over Financial Reporting.

There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~September 30, 2019~~March 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting, except ~~that in August 2019, we completed~~for the Foroni Acquisition, which represented ~~$5.7~~$14.4 million of our consolidated net sales for the quarter ended ~~September 30, 2019~~March 31, 2020 and approximately ~~$61~~$62.3 million of our consolidated assets as of ~~September 30, 2019.~~March 31, 2020.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are various claims, lawsuits and pending actions against us incidental to our operations, including the income tax assessments against our Brazilian subsidiary, Tilibra Produtos de Papelaria Ltda (the "Brazil Tax Assessments"), which is more fully described in our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 and in "Part I, Item 1. Note 11. Income Taxes - Brazil Tax Assessments" to the Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.

It is the opinion of management that (other than the Brazil Tax Assessments) the ultimate resolution of ~~these~~currently outstanding matters will not have a material adverse effect on our ~~consolidated~~ financial condition, results of operations or cash flow. However, there is no assurance that we will ultimately be successful in our defense of any of these matters or that an adverse outcome in any matter will not affect our results of operations, financial condition or cash flow. Further, future claims, lawsuits and legal proceedings could materially and adversely affect our business, reputation, results of operations, and financial condition.

ITEM 1A. RISK FACTORS

~~There~~Except as set forth below, there have been no material changes in our risk factors from those disclosed in "Part I, Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

Our business and results of operations have been and will continue to be materially and adversely affected by the impact of the COVID-19 global pandemic, which may also adversely affect our financial condition and liquidity.

COVID-19 has been declared by the World Health Organization to be a "pandemic" and has spread to many of the countries in which we, our customers and consumers, our suppliers and our other business partners do business. National, state and local governments in affected regions have implemented and likely will continue to implement or maintain safety precautions, including quarantines, travel restrictions, business and school closures, cancellations of public gatherings and other measures. Other organizations and individuals have taken additional steps to avoid or reduce infection, including limiting travel and staying home from work. These measures have caused and continue to cause significant disruptions to normal business operations both in and outside of affected areas and have had and are expected to continue to have significant adverse impacts on businesses and financial markets worldwide. Similarly, our business and results of operations have been and will continue to be materially and adversely affected by these events as well as by the current and expected continued negative impact on the global economy.

During the first quarter, COVID-19 impacted our Asian supply chain and we experienced and are continuing to experience some out-of-stocks and lost sales, but we have seen continued improvement since then. We currently believe the most significant Asian supply chain issues are largely behind us, but there can be no assurance that there will not be future supply chain disruptions or a reemergence of supply chain impacts as a result of COVID-19.

During the latter half of March 2020, we began to experience a decline in the demand for our products resulting in decreased sales, particularly in our EMEA and International segments, which were the first to experience the full effects of COVID-19 and the government and business response to the pandemic. This trend has continued and expanded into the vast majority of our markets and will continue to materially and negatively impact our sales, earnings and results of operations at least through year-end.

We continue to monitor our operations and government recommendations and have made modifications to our normal operations because of the COVID-19 outbreak to protect the health and safety of our employees, suppliers and customers. These modifications vary from country to country depending on local conditions and government mandates and are more fully described in "Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation" of this Quarterly Report on Form 10-Q under the heading "COVID-19 Impact". While we have taken actions which serve to reduce the possibility of transmission of the virus within our workplace, they do not assure that our employees will not contract the virus or bring it to the workplace. Furthermore, we may be forced to close locations for reasons such as the health of our employees, because of disruptions in our supply chain or reduced demand, or due to further governmental orders. Were such an event to occur, our operations could be disrupted to varying degrees which could have a material adverse effect on our business, results of operation, financial condition and liquidity.

To begin to address the financial impact of the pandemic on our results of operation, we have undertaken cost-cutting initiatives to better align our cost structure with the expected decline in 2020 sales. These actions are more fully described in "Part 1. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation" of this Quarterly Report on Form 10Q under the heading "COVID-19 Impact". We do not expect the measures taken to date to fully offset the impact of COVID-19

on our second quarter sales and results of operations. There can be no assurance that these cost-savings measures, and any additional cost-savings measures we may implement in the future will be sufficient to offset, in whole or in part, the current and future adverse financial impacts of COVID-19 on our business, results of operation or financial condition.

Likewise, as discussed in more detail in "Part 1, Item 2. Management’s Discussion and analysis of Financial Condition and Results of Operations" in this Quarterly Report on Form 10-Q under the heading "COVID-19 Impact", we are monitoring our working capital, including our accounts receivable and inventory, closely. We anticipate an increased level of late payments and potential bad debts which may require us to increase bad debt reserves. We also anticipate higher than usual seasonal borrowing under our revolving line of credit and elevated levels of inventory the second quarter. Our ability to draw on our line of credit and service our indebtedness will depend, in part, upon our future operating performance which likely will be negatively impacted by the effects of the COVID-19 pandemic. Should we continue to experience adverse impacts to our working capital, this could negatively impact our cash flow.

The extent of the impact of COVID-19 on our business and financial results will also depend on future developments, including the severity, duration and spread of the outbreak within the markets in which we operate, the depth and nature of the economic consequences from the closures, actions taken globally, nationally and locally to contain or mitigate the effects of the pandemic, including its impact on the global economy, and the related impact on consumer confidence and spending, all of which are highly uncertain and ever-changing. Additionally, these are uncertainties regarding how geographies, distribution channels and consumer behaviors will evolve over time. Our North America segment and our operations in Brazil and Mexico are highly dependent on back-to-school business. Any delay in the reopening of schools in these geographies or changes in the behaviors of our customers and our consumers could have a material adverse effect on our sales, margins, results of operation and financial condition.

The long-term impact of the COVID-19 and its follow-on economic impact on our business will also depend on the effectiveness of the actions we and our customers take to manage our businesses through this uncertain period. The extent to which we and our customers may successfully mitigate the impact of COVID-19, if at all, is presently unclear.

We expect that the pandemic will materially and adversely affect our business, sales and results of operations for the remainder of 2020, but we cannot reasonably estimate its financial impact beyond the second quarter of 2020 at this time. We are also uncertain as to the full magnitude of the impact the pandemic will have on the Company’s results of operations, financial condition, liquidity, customers, suppliers, industry and employees over the longer term. Even after the COVID-19 pandemic has subsided, we may experience materially adverse impacts on our business due to any resulting economic recession or depression, a change in the competitive landscape or changes in customers’ and consumers’ behaviors.

Finally, many of the risks associated with our business are currently elevated and likely will continue to be elevated as a result of COVID-19. These include, without limitation: a relatively limited number of large customers account for a significant percentage of our sales; risks associated with shifts in the channels of distribution for our products; issues that affect customer and consumer spending decisions during periods of economic uncertainty or weakness; risks associated with foreign currency fluctuations; challenges related to the highly competitive business environments in which we operate; our ability to develop and market innovative products that meet consumer demands; our ability to successfully implement our cost reduction and productivity initiatives; risks associated with a cybersecurity incident or information security breach, including that related to a disclosure of personally identifiable information; the risks associated with outsourcing production of certain of our products, information systems and other administrative functions; the continued decline in the use of certain of our products; risks associated with changes in the cost or availability of raw materials, labor, transportation and other necessary supplies and services and the cost of finished goods; the sufficiency of investment returns on pension assets, risks related to actuarial assumptions and changes in the unfunded liabilities of a multi-employer pension plan; any impairment of our intangible assets; risks associated with our indebtedness, including our debt service obligations, limitations imposed by restrictive covenants, our ability to comply with financial ratios and tests; the bankruptcy or financial instability of our customers and suppliers; the volatility of our stock price, and other risks and uncertainties described in "Part I, Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2019.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Not applicable.

(b) Not applicable.

The following table provides information about our purchases of equity securities during the quarter ended ~~September 30, 2019:~~March 31, 2020:

Period Total Number of Shares Purchased Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plan or Program⁽¹⁾

Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program⁽¹⁾
July 1, 2019 to July 31, 2019 1,504,310
$ 7.91
1,504,310
$ 157,733,070
August 1, 2019 to August 31, 2019 353,935
9.46
353,935
154,384,473
September 1, 2019 to September 30, 2019 249,378
9.59
249,378
151,993,771
Total 2,107,623
$ 8.37
2,107,623
$ 151,993,771



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan or Program⁽¹⁾	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program⁽¹⁾
January 1, 2020 to January 31, 2020	—	$	—	—	$	143,964,231
February 1, 2020 to February 28, 2020	535,839	8.30		535,839	139,517,188
March 1, 2020 to March 31, 2020	2,154,453	6.72		2,154,453	125,045,248
Total	2,690,292	$	7.03	2,690,292	$	125,045,248

(1) On February 14, 2018, the Company announced that its Board of Directors had approved an authorization to repurchase up to $100 million in shares of its common stock. On August 7, 2019, the Company announced that its Board of Directors had approved an authorization to repurchase up to an additional $100 million in shares of its common stock.

The number of shares to be purchased, if any, and the timing of purchases will be based on the Company's stock price, leverage ratios, cash balances, general business and market conditions, and other factors, including alternative investment opportunities and working capital needs. The Company may repurchase its shares, from time to time, through a variety of methods, including open-market purchases, privately negotiated transactions and block trades or pursuant to repurchase plans designed to comply with the Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. Any stock repurchases will be subject to market conditions, SEC regulations and other considerations and may be commenced or suspended at any time or from time to time, without prior notice. Accordingly, there is no guarantee as to the number of shares that will be repurchased or the timing of such repurchases.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit

Number Description of Exhibit


~~3.1~~10.1	~~Restated Certificate of Incorporation of~~2019 ACCO Brands Corporation Incentive Plan Nonqualified Stock Option Agreement*


10.2	2019 ACCO Brands Corporation Incentive Plan Nonqualified Stock Option Agreement - Non-U.S. Employees*


31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *


31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *


32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **


32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **


101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document


104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)



*	Filed herewith.



**	Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



REGISTRANT:

ACCO BRANDS CORPORATION

By:	/s/ Boris Elisman
Boris Elisman
Chairman, President and Chief Executive Officer (principal executive officer)

By:	/s/ Neal V. Fenwick
Neal V. Fenwick
Executive Vice President and Chief Financial Officer (principal financial officer)

By:	/s/ ~~Kathleen D. Hood~~James M. Dudek, Jr.
~~Kathleen D. Hood~~James M. Dudek, Jr.
Senior Vice President, Corporate Controller and Chief Accounting Officer (principal accounting officer)

Date: ~~October 30, 2019~~May 5, 2020

4943



(in millions)	Balance at December 31, 2018			Adjustments due to ASU 2016-02			Balance at January 1, 2019
Assets:
Property, plant and equipment, net	$	263.7		$	(0.9	)	$	262.8
Right of use asset, leases	—			90.9			90.9

Liabilities and stockholders' equity:
Current portion of long-term debt	39.5			(0.1		)	39.4
Lease liabilities	—			24.1			24.1
Long-term debt, net	843.0			(0.1		)	842.9
Long-term lease liabilities	11.0			65.6			76.6
Accumulated deficit	(656.8		)	0.5			(656.3		)



	Balance at September 30, 2019
(in millions)	As Reported			Balances without adoption of ASU 2016-02			Effect of Change Higher/(Lower)
Condensed Consolidated Balance Sheet:
Assets:
Property, plant and equipment, net	$	259.4		$	260.2		$	(0.8	)
Right of use asset, leases	95.8			—			95.8

Liabilities and stockholders' equity:
Current portion of long-term debt	31.6			31.7			(0.1		)
Lease liabilities	20.6			0.3			20.3
Long-term debt, net	882.5			882.6			(0.1		)
Long-term lease liabilities	84.6			10.2			74.4
Accumulated deficit	(611.3		)	(611.8		)	0.5



(in millions)	At August 2, 2019
Calculation of Goodwill:
Purchase price, net of working capital adjustment	$	42.1

Plus fair value of liabilities assumed:
Accounts payable and accrued liabilities	12.1
Deferred tax liabilities	5.2
Debt	7.6
Lease liabilities	4.8
Fair value of liabilities assumed	$	29.7

Less fair value of assets acquired:
Cash acquired	—
Accounts receivable	17.5
Inventory	12.6
Property and equipment	8.9
Identifiable intangibles	10.2
Deferred tax assets	2.2
Right of use asset, leases	4.8
Other assets	3.7
Fair value of assets acquired	$	59.9

Goodwill	$	11.9



(in millions)	At January 31, 2019
Inventory	$	2.8
Identifiable intangibles	3.2
Fair value of assets acquired	$	6.0



(in millions)	At July 2, 2018
Calculation of Goodwill:
Purchase price, net of working capital adjustment	$	39.1

Plus fair value of liabilities assumed:
Accounts payable and accrued liabilities	10.1
Deferred tax liabilities	3.1
Other non-current liabilities	6.5
Fair value of liabilities assumed	$	19.7

Less fair value of assets acquired:
Cash acquired	1.9
Accounts receivable	30.0
Inventory	7.1
Property, plant and equipment	0.6
Identifiable intangibles	10.3
Deferred tax assets	2.0
Other assets	4.2
Fair value of assets acquired	$	56.1

Goodwill	$	2.7



(in millions)	Fair Value		Remaining Useful Life Ranges
Trade name - amortizable	$	0.8	10 Years
Customer relationships	2.4		7 Years
Total identifiable intangibles acquired	$	3.2



	2019 3^rdQTR Average Versus 2018 3^rd QTR Average	2019 YTD Average Versus 2018 YTD Average
Currency	Increase/(Decline)	Increase/(Decline)
Euro	(4)%	(6)%
Australian dollar	(6)%	(8)%
Canadian dollar	(1)%	(3)%
Brazilian real	—%	(8)%
Swedish krona	(7)%	(9)%
British pound	(5)%	(6)%
Mexican peso	(2)%	(1)%
Japanese yen	3%	1%



	Three Months Ended September 30, 2019						Amount of Change Compared to the Three Months Ended September 30, 2018
	Net Sales		Segment Operating Income (A)		Segment Operating Income Margin		Net Sales			Net Sales	Segment Operating Income (A)			Segment Operating Income		Margin Points
							Net Sales			Net Sales	Segment Operating Income (A)			Segment Operating Income
(in millions)							$			%	$			%
ACCO Brands North America	$	272.4	$	33.7	12.4	%	$	9.0		3.4%	$	—		—	%	(40	)
ACCO Brands EMEA	133.1		13.8		10.4	%	(10.0		)	(7.0)%	(0.8		)	(5.5	)%	20
ACCO Brands International	100.2		10.8		10.8	%	(0.6		)	(0.6)%	(5.3		)	(32.9	)%	(520	)
Total	$	505.7	$	58.3			$	(1.6	)		$	(6.1	)

	Three Months Ended September 30, 2018
	Net Sales		Segment Operating Income (A)		Segment Operating Income Margin

(in millions)
ACCO Brands North America	$	263.4	$	33.7	12.8	%
ACCO Brands EMEA	143.1		14.6		10.2	%
ACCO Brands International	100.8		16.1		16.0	%
Total	$	507.3	$	64.4



	2019
	1st Quarter			2nd Quarter			3rd Quarter			Year-to-Date
Net cash (used) provided by operating activities	$	(61.3	)	$	(54.4	)	$	190.8		$	75.1

Net cash (used) by investing activities:	(12.5		)	(7.1		)	(49.5		)	(69.1		)

Net cash provided (used) by financing activities:	107.6			54.3			(196.0		)	(34.1		)
Effect of foreign exchange rate changes on cash and cash equivalents	(0.3		)	0.8			(1.7		)	(1.2		)
Net increase (decrease) in cash and cash equivalents	$	33.5		$	(6.4	)	$	(56.4	)	$	(29.3	)

	2018
	1st Quarter			2nd Quarter			3rd Quarter			Year-to-Date
Net cash provided (used) by operating activities	$	60.4		$	(66.9	)	$	91.2		$	84.7

Net cash (used) by investing activities:	(8.0		)	(9.0		)	(46.4		)	(63.4		)

Net cash (used) provided by financing activities:	(7.0		)	99.1			(88.2		)	3.9
Effect of foreign exchange rate changes on cash and cash equivalents	0.4			(6.7		)	(0.8		)	(7.1		)
Net increase (decrease) in cash and cash equivalents	$	45.8		$	16.5		$	(44.2	)	$	18.1