ACCO Brands Corporation Reports Third Quarter Results; Raises Estimate of Merger Synergies to $60 Million.

LINCOLNSHIRE, Ill. -- ACCO Brands Corporation (NYSE:ABD):

* Third quarter adjusted operating margins improve over the prior-year period; synergy savings begin positively impacting bottom line

* Announces realignment of commercial businesses and completion of synergy review

* Raises estimate of merger integration annual cost synergy target to $60 million, a $20 million increase

* Pays down additional $20 million in debt, achieving more than $100 million repayment year-to-date

ACCO Brands Corporation (NYSE:ABD), a world leader in select categories of branded office products, reported its third quarter 2006 results today. The company also announced an increase to $60 million of its targeted annual synergy savings from its merger with General Binding Corporation ("GBC"), resulting from a realignment of its commercial businesses and completion of its integration planning. The new estimate results in an increase of $20 million of annual cost synergies, which it expects to achieve by the end of 2009.

"We knew last year that the merger with GBC created substantial opportunity for us," said David D. Campbell, chairman and chief executive officer. "As the integration has evolved, it is clear that the opportunities are even greater than we initially projected. Today we are announcing a strategic realignment of our businesses that will allow us to better focus our new product development activities and drive revenue growth in the Document Finishing and Commercial Laminating Solutions categories, while realizing significantly larger net cost synergies."

In a separate announcement the Company detailed specific plans for its business and reporting segment realignment, which it intends to implement in time for 2007 reporting.

"The third quarter marked a significant inflection point for our business," Campbell said. "We started to see our integration efforts positively impact the bottom line. From this point forward, we expect to see positive year-over-year improvement in operating income as synergies build and we recover margins through price increases."

During the quarter, the company announced the consolidation or closure of an additional four facilities within its Office Products Group, which, when implemented, will complete the merger integration within this group. Since the beginning of 2006, the company has disclosed plans to close or downsize 28 facilities, as well as significantly expand strategically located manufacturing and distribution centers in Europe and the United States. These actions will ultimately account for 100% of the initially targeted cost synergies of $40 million.

The company continued to pay down its debt by a further $20 million in the third quarter, bringing to more than $100 million its debt reduction for the full year, far exceeding its mandatory debt repayment schedule. "Building a strong balance sheet is a high priority to allow for future financial flexibility and growth," Campbell said.

Third Quarter Results

Reported results include the operations of the former General Binding Corporation ("GBC") for the entire third quarter of 2006, but only the last six weeks of the comparable quarter of 2005.

Third quarter net sales increased 18%, to $499.2 million, due to the August 2005 acquisition of GBC. Current year net sales were 2% lower than the prior-year pro forma quarter. An early exit of certain low-margin business within U.S. Office Products offset growth in all other segments. (Refer to p. 5 for the definition of pro forma results and non-GAAP financial measures.)

The company reported third quarter net income of $18.1 million, or $0.33 per diluted share, compared to net income of $4.5 million, or $0.10 per diluted share in the prior-year quarter. Net income in the current quarter includes restructuring and non-recurring after-tax costs totaling $9.6 million ($13.6 million pre-tax), or $0.18 per diluted share, and incremental after-tax expense of $2.3 million, or $0.04 per diluted share, related to the new company's long-term compensation plan and required expensing of equity compensation under SFAS 123R. Also included in net income, but eliminated from adjusted net income, was a tax credit of $9.5 million resulting from the recognition of additional tax benefits from the filing of tax returns associated with the spin-off from Fortune Brands and merger with GBC in 2005. In the comparable quarter in 2005, the company incurred $11.4 million in income tax charges related to a corporate reorganization to facilitate the merger of its international operations.

Adjusted net income increased to $18.2 million, or $0.34 per diluted share, compared to adjusted pro forma net income of $15.8 million, or $0.30 per diluted share, in the prior-year quarter. Excluding incremental after-tax long-term compensation expense of $2.3 million, or $0.04 per diluted share, current-year adjusted net income was $0.38 per diluted share. The increase was due to operating profit improvements in the Office Products and Computer Products groups, as savings from synergies offset investments in SG&A and higher raw material and freight costs. (Refer to p. 12 for a reconciliation of "adjusted" results to GAAP.)

Results of Business Segments

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Office Products Group

Office Products net sales increased 11% to $327.9 million, compared to $296.0 million in the prior-year quarter. Compared to prior-year pro forma results, net sales declined 3% after adjusting for currency and calendar days. The decline was due to the early exit of certain low-margin products and strong June demand ahead of the July price increase within U.S. Office Products, which offset growth in Australia and Latin America.

Office Products reported operating income was $10.9 million, compared to $25.0 million in the prior year. Adjusted operating income (refer to the table on p. 14) decreased 2% to $24.0 million, compared to adjusted pro forma operating income of $24.6 million in the prior-year quarter, principally due to equity compensation expense as noted in the table above. Adjusted operating income margins increased to 7.3% from 7.2%. Office Products operating income improved in all regions of the world except Europe. Excluding items affecting year-over-year comparability, operating income improved as a result of a number of factors in the U.S. business, principally net synergy savings and modest benefits from some July price increases. These factors were partially offset by European operations, which incurred unfavorable pricing coupled with higher raw material costs as well as increased investments in SG&A infrastructure to transition the European business model.

Computer Products Group

Computer Products sales increased 5% to $62.2 million, compared to $59.3 million in the prior-year quarter. The growth was driven primarily by increased sales of security products, iPod[R] accessories and notebook docking stations. This growth was lower than historical rates because of the company's planned exit from the low-margin cleaning category and early shipment of new products in the prior year.

Computer Products operating income increased to $14.6 million, from $11.6 million. On an adjusted basis (refer to the table on p. 14), operating income was $14.9 million and operating margins increased to 24.0% from 19.6%, driven by favorable sales mix from new products across all regions.

Commercial-Industrial and Print Finishing Group

Commercial-Industrial and Print Finishing ("IPFG") net sales increased to $45.9 million, compared to $24.8 million in the prior-year quarter. Compared to prior-year pro forma results, IPFG net sales increased 1%. On a constant currency basis, sales were down 1%. Sales were impacted by competitive pricing for laminating film, offset in part by strong machine sales, which should drive future film sales.

IPFG reported operating income increased to $2.2 million, compared to $2.0 million in the prior-year quarter. Adjusted operating income (refer to the table on p. 14) decreased 35%, to $2.2 million, compared to adjusted pro forma operating income of $3.4 million in the prior-year quarter. Operating margins decreased 270 basis points. The decrease was due to adverse sales mix from lower-margin machine sales, lower pricing and higher raw material costs, as resin costs continue to be volatile.

Other Commercial

Other Commercial net sales increased to $63.2 million, compared to $43.9 million in the prior-year quarter. Compared to prior-year quarter pro forma results, net sales increased 3%, adjusting for currency and calendar days. The increase was driven by price increases in the document finishing business.

Other Commercial reported operating income decreased to $5.8 million, compared to $6.1 million in the prior-year quarter. Adjusted operating income (refer to the table on p. 14) increased to $6.0 million, from adjusted pro forma operating income of $5.9 million in the prior-year quarter, and adjusted margins stayed flat at 9.5%.

Business Outlook

ACCO Brands believes that given the current economic environment, business integration and de-leveraging should enable the company to exhibit longer-term growth rates comprising revenue growth in the low- to mid-single-digits, operating income growth in the mid- to high-single-digits and diluted earnings-per-share growth in the low-double-digits. Sales growth for the remainder of 2006 and through 2007 will be impacted by the $75 million exit of low-margin business, of which only $10 million has been shed to date, and a further $20 million should be shed by the end of 2006.

The company continues to believe that full-year 2006 adjusted EBITDA (refer to p. 12 for the calculation of adjusted EBITDA) will be comparable to 2005 pro forma levels, with the positive effects of both increased synergies and the effect of the July price increase benefiting the second half of 2006. In addition, the fourth quarter should compare favorably to the prior-year period as the company anticipates stronger volumes versus a weak December prior period and a comparable impact from the stepped-up investments in corporate costs associated with the company's new status as an independent public company, in Computer Products' go-to-market efforts, and in the company's European office products infrastructure. The fourth quarter of 2005 was also a period in which the company began to incur significant increases in certain raw material costs.

Full-year operating income and EPS will be impacted by equity and incentive compensation charges relative to 2005 pro forma results in connection with the new company's inaugural long-term incentive compensation plan and required stock option expensing under SFAS 123R. The company anticipates the incremental net of tax cost to be approximately $10 million, or $0.18 per share, for 2006. The company still anticipates achieving a run-rate adjusted operating income margin, before restructuring, amortization of intangible assets and stock-based compensation expense, of 12% exiting 2008, or approximately 11% including these factors.

Webcast

At 8:30 a.m. Eastern Time today, ACCO Brands Corporation will host a conference call to discuss the company's third quarter results. The call will be broadcast live via webcast. The webcast can be accessed through the Investor Relations section of www.accobrands.com. The webcast will be in listen-only mode and will be available for replay for one month following the event.

Pro Forma and Non-GAAP Financial Measures

In order to provide a more meaningful comparison to prior-year numbers, the company has presented pro forma results for prior-year periods assuming that the merger with GBC had occurred on January 1, 2005, instead of August 17, 2005, the actual date of the merger. Pro forma results are based on SEC regulations and are on a non-GAAP basis.

"Adjusted" results exclude all restructuring and restructuring-related items, as well as unusual tax items, for the combined company, and are non-GAAP measures. Adjusted pro forma information is provided to assist in the comparability with current-period results. There could be limitations associated with the use of non-GAAP financial measures as compared to the use of the most directly comparable GAAP financial measure. Management uses the adjusted measures to determine the returns generated by its operating segments and to evaluate and identify cost-reduction initiatives. Management believes these measures provide investors with helpful supplemental information regarding the underlying performance of the company from year to year. These measures may be inconsistent with measures presented by other companies. (Refer to the attached pro forma and adjusted results schedules provided herein, as well as the company's reports on Form 8-K furnished to the Securities and Exchange Commission on February 14, 2006.)

About ACCO Brands Corporation

ACCO Brands Corporation is a world leader in select categories of branded office products, with annual revenues of nearly $2 billion. Its industry-leading brands include Day-Timer[R], Swingline[R], Kensington[R], Quartet[R], GBC[R], Rexel[R], and Wilson Jones[R], among others. Under the GBC brand, the company is also a leader in the professional print finishing market.

Forward-Looking Statements

This press release contains statements which may constitute "forward-looking" statements as that term is defined in the Private Securities Litigation Reform Act of 1995.

These forward-looking statements are subject to certain risks and uncertainties, are made as of the date hereof and the company assumes no obligation to update them. ACCO Brands' ability to predict results or the actual effect of future plans or strategies is inherently uncertain and actual results may differ from those predicted depending on a variety of factors, including but not limited to fluctuations in cost and availability of raw materials; competition within the markets in which the company operates; the effects of both general and extraordinary economic, political and social conditions; the dependence of the company on certain suppliers of manufactured products; the effect of consolidation in the office products industry; the risk that businesses that have been combined into the company as a result of the merger with General Binding Corporation will not be integrated successfully; the risk that targeted cost savings and synergies from the aforesaid merger and other previous business combinations may not be fully realized or take longer to realize than expected; disruption from business combinations making it more difficult to maintain relationships with the company's customers, employees or suppliers; foreign exchange rate fluctuations; the development, introduction and acceptance of new products; the degree to which higher raw material costs, and freight and distribution costs, can be passed on to customers through selling price increases and the effect on sales volumes as a result thereof; increases in health care, pension and other employee welfare costs; as well as other risks and uncertainties detailed from time to time in the company's SEC filings.

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