16. Information on Business Segments

Effective in the first quarter of 2017, as a result of the Esselte Acquisition, the Company realigned its operating structure, which affected the makeup of its business segments for financial reporting purposes. The Company has three operating business segments each of which is comprised of different geographic regions. The Company no longer reports the results of its Computer Products Group as a separate segment. Results of the former Computer Products Group are reflected in the appropriate geographic segment based on the region from which sales are made. The Company's three realigned business segments are as follows:



Operating Segment	Geographic Regions	Primary Brands
ACCO Brands North America	United States and Canada	AT-A-GLANCE^®, Five Star^®, GBC^®, Hilroy^®, Kensington^®, Mead^®, Quartet^®, and Swingline^®

ACCO Brands EMEA	Europe, Middle East and Africa	Derwent^®, Esselte^®, GBC^®, Kensington^®, Leitz^®, NOBO^®, Rapid^®, and Rexel^®

ACCO Brands International	Australia, Latin America and Asia-Pacific	Artline^®, GBC^®, Kensington^®, Marbig^®, Quartet^®, Rexel^®, Tilibra^®, and Wilson Jones^®

We have restated our financial statements for each of the periods presented to reflect this change in reportable business segments.

Each of the Company's three operating segments designs, markets, sources, manufactures and sells recognized consumer and end-user demanded brands used in businesses, schools and homes. Product designs are tailored based on end-user preferences in each geographic region.

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

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 calendar year-end purchases; we expect sales of consumer products to become an increasingly greater percentage of our revenue as they are faster growing than most business-related products.

ACCO Brands EMEA

The ACCO Brands EMEA segment is comprised of Europe, the Middle East and Africa, where 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, Latin America and Asia-Pacific where the Company is a leading branded supplier of consumer and business products under brands such as Artline^®, 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 businesses, schools and homes. The majority of revenue in this segment is related to consumer products and is associated with the “back-to-school” season and calendar year-end purchases; we expect sales of consumer products to become an increasingly greater percentage of our revenue as they are faster growing than most business-related products.

Customers

ACCO Brands markets and sells its strong multi-product offering broadly and is not dependent on any one channel. Our products are sold through all relevant channels, namely retailers, including: mass retailers; e-tailers; discount, drug/grocery and variety chains; warehouse clubs; hardware and specialty stores; independent office product dealers; office superstores; and contract stationers. We also sell directly to commercial and consumer end-users through our e-commerce platform and our direct sales organization.

Net sales by business segment for the years ended December 31, 2017, 2016 and 2015 were as follows:



(in millions of dollars)	2017		2016		2015
ACCO Brands North America	$	999.0	$	1,016.1	$	1,025.7
ACCO Brands EMEA	542.8		171.8		199.7
ACCO Brands International	407.0		369.2		285.0
Net sales	$	1,948.8	$	1,557.1	$	1,510.4

Operating income by business segment for the years ended December 31, 2017, 2016 and 2015 was as follows:



(in millions of dollars)	2017			2016			2015
ACCO Brands North America	$	155.6		$	153.3		$	151.6
ACCO Brands EMEA	37.1			12.6			18.0
ACCO Brands International	50.9			49.4			29.1
Segment operating income	243.6			215.3			198.7
Corporate⁽¹⁾	(50.6		)	(48.0		)	(35.2		)
Operating income⁽²⁾	193.0			167.3			163.5
Interest expense	41.1			49.3			44.5
Interest income	(5.8		)	(6.4		)	(6.6		)
Equity in earnings of joint-venture	—			(2.1		)	(7.9		)
Other (income) expense, net	(0.4		)	1.4			2.1
Income before income tax	$	158.1		$	125.1		$	131.4


(1)	Corporate operating loss in 2017, 2016 and 2015 includes transaction costs of $5.0 million, $10.5 million and $0.6 million respectively, primarily for legal and due diligence expenditures associated with the Esselte and PA acquisitions.


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

The following table presents the measure of segment assets used by the Company’s chief operating decision maker.



	December 31,
(in millions of dollars)	2017		2016
ACCO Brands North America⁽³⁾	$	413.9	$	404.3
ACCO Brands EMEA⁽³⁾	287.6		104.0
ACCO Brands International⁽³⁾	338.2		323.4
Total segment assets	1,039.7		831.7
Unallocated assets	1,758.6		1,232.0
Corporate⁽³⁾	0.8		0.8
Total assets	$	2,799.1	$	2,064.5


(3)	Represents total assets, excluding: goodwill and identifiable intangibles resulting from business acquisitions, intercompany balances, cash, deferred taxes, derivatives, prepaid pension assets and prepaid debt issuance costs.

As a supplement to the presentation of segment assets presented above, the table below presents segment assets, including the allocation of identifiable intangible assets and goodwill resulting from business combinations.



	December 31,
(in millions of dollars)	2017		2016
ACCO Brands North America⁽⁴⁾	$	1,204.3	$	1,206.8
ACCO Brands EMEA⁽⁴⁾	711.7		155.2
ACCO Brands International⁽⁴⁾	634.0		622.5
Total segment assets	2,550.0		1,984.5
Unallocated assets	248.3		79.2
Corporate⁽⁴⁾	0.8		0.8
Total assets	$	2,799.1	$	2,064.5


(4)	Represents total assets, excluding: intercompany balances, cash, deferred taxes, derivatives, prepaid pension assets and prepaid debt issuance costs.

Capital spend by segment was as follows:



	December 31,
(in millions of dollars)	2017		2016		2015
ACCO Brands North America	$	16.3	$	10.3	$	12.5
ACCO Brands EMEA	5.1		2.9		10.3
ACCO Brands International	9.6		5.3		4.8
Total capital spend	$	31.0	$	18.5	$	27.6

Depreciation expense by segment was as follows:



	December 31,
(in millions of dollars)	2017		2016		2015
ACCO Brands North America	$	17.7	$	19.7	$	23.3
ACCO Brands EMEA	11.9		5.0		3.4
ACCO Brands International	6.0		5.7		5.7
Total depreciation	$	35.6	$	30.4	$	32.4

Property, plant and equipment, net by geographic region was as follows:



	December 31,
(in millions of dollars)	2017		2016
U.S.	$	102.3	$	103.0
Brazil	35.6		36.8
U.K.	30.5		30.3
Poland	26.8		—
Germany	21.2		—
Australia	14.7		12.5
Other countries	47.4		15.8
Property, plant and equipment, net	$	278.5	$	198.4

Net sales by geographic region⁽⁵⁾ were as follows:



	December 31,
(in millions of dollars)	2017		2016		2015
U.S.	$	880.4	$	894.4	$	904.3
Australia	173.5		156.5		91.8
Germany	141.4		—		—
Canada	118.6		121.7		121.4
Brazil	114.6		102.6		92.0
Netherlands	111.3		101.4		108.7
Sweden	61.3		—		—
U.K.	59.2		59.1		76.4
Mexico	50.6		47.3		49.6
Other countries	237.9		74.1		66.2
Net sales	$	1,948.8	$	1,557.1	$	1,510.4


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

Top Customers

Net sales to our five largest customers totaled $615.1 million, $663.5 million and $637.7 million for the years ended December 31, 2017, 2016 and 2015, respectively. Net sales to no customer exceeded 10% of net sales for the year ended December 31, 2017. Net sales to Staples, our largest customer, were $210.5 million (14%) and $204.1 million (14%) for the years ended December 31, 2016 and 2015, respectively. Net sales to Walmart were $161.7 million (10%) for the year ended December 31, 2016. Net sales to Office Depot were $152.5 million (10%) for the year ended December 31, 2015. Net sales to no other customers exceeded 10% of net sales for any of the last three years.

Concentration of credit risk with respect to trade accounts receivable is partially mitigated because a large number of geographically diverse customers make up each operating company's domestic and international customer base, thus spreading the credit risk. As of December 31, 2017 and 2016, our top five trade account receivables totaled $148.4 million and $162.2 million, respectively.