6. Stock-Based Compensation

The ACCO Brands Corporation Incentive Plan (the "Plan") provides for stock based awards generally in the form of stock options, stock-settled appreciation rights ("SSARs"), restricted stock units ("RSUs") and performance stock units ("PSUs"), any of which may be granted alone or with other types of awards and dividend equivalents. We have one share-based compensation plan under which a total of up to 13,118,430 shares may be issued under awards to key employees and non-employee directors.

Beginning in 2017, per ASU No. 2016-09 Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, the Company made the allowed accounting policy election to account for forfeitures as they occur, which affects the timing of stock compensation expense. Prior to 2017, forfeitures were estimated at the time of grant in order to calculate the amount of share-based payment awards ultimately expected to vest and the forfeiture rate was based on historical experience.

We will satisfy the requirement for delivering shares of our common stock for our Plan by issuing new shares.

The following table summarizes the impact of all stock-based compensation expense on our Consolidated Statements of Income for the years ended December 31, 2017, 2016 and 2015.



(in millions of dollars)	2017			2016			2015
Selling, general and administrative expense	$	17.0		$	19.4		$	16.0
Loss before income tax	(17.0		)	(19.4		)	(16.0		)
Income tax benefit	(6.1		)	(7.0		)	(5.7		)
Net loss	$	(10.9	)	$	(12.4	)	$	(10.3	)

There was no capitalization of stock-based compensation expense.

Stock-based compensation expense by award type for the years ended December 31, 2017, 2016 and 2015 was as follows:



(in millions of dollars)	2017		2016		2015
Stock option compensation expense	$	2.4	$	2.9	$	3.9
RSU compensation expense	4.3		4.5		4.7
PSU compensation expense	10.3		12.0		7.4
Total stock-based compensation expense	$	17.0	$	19.4	$	16.0

Stock Option and SSAR Awards

The exercise price of each stock option equals or exceeds the fair market price of our stock on the date of grant. Options can generally be exercised over a maximum term of up to seven years. Stock options outstanding as of December 31, 2017 generally vest ratably over three years. In 2016, we did not grant any option awards. SSARs were last issued in 2009 and expired in 2016. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model and the weighted average assumptions as outlined in the following table:



	Year Ended December 31,
	2017			2015
Weighted average expected lives	4.8		years	4.5		years
Weighted average risk-free interest rate	2.04		%	1.47		%
Weighted average expected volatility	39.7		%	46.5		%
Expected dividend yield	0.0		%	0.0		%
Weighted average grant date fair value	$	4.70		$	3.00

Volatility was calculated using ACCO Brands' historic volatility. The weighted average expected option term reflects ACCO Brands' historic life for all option tranches beginning in 2017. Prior to 2017, the weighted average expected option term reflects the application of the simplified method, which defines the life as the average of the contractual term of the option and the weighted average vesting period for all option tranches. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

A summary of the changes in stock options outstanding under the Plan during the year ended December 31, 2017 is presented below:



	Number Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2016	4,133,874		$	7.82
Granted	745,772		$	12.75
Exercised	(547,107	)	$	7.72
Forfeited	(59,888	)	$	9.57
Outstanding at December 31, 2017	4,272,651		$	8.68	3.3 years	$	15.5	million
Exercisable shares at December 31, 2017	3,157,606		$	7.88	2.6 years	$	13.6	million

We received cash of $4.2 million, $6.8 million and $0.7 million from the exercise of stock options during the years ended December 31, 2017, 2016 and 2015, respectively. The aggregate intrinsic value of options exercised during the years ended December 31, 2017, 2016 and 2015 totaled $2.8 million, $3.5 million and $0.7 million, respectively.

The aggregate intrinsic value of SSARs exercised during the years ended December 31, 2016 and 2015 totaled $2.9 million and $2.0 million, respectively. As of December 31, 2016, there were no SSARs outstanding.

The fair value of options vested during the years ended December 31, 2017, 2016 and 2015 was $2.6 million, $4.1 million and $3.8 million, respectively. As of December 31, 2017, we had unrecognized compensation expense related to stock options of $2.7 million, which will be recognized over a weighted-average period of 1.5 years.

Stock Unit Awards

RSUs vest over a pre-determined period of time, generally three years from the date of grant. Stock-based compensation expense for the years ended December 31, 2017, 2016 and 2015 includes $0.8 million, $0.9 million and $0.8 million, respectively, of expense that consisted of shares of stock (included in RSU compensation expense) and RSUs granted to non-employee directors, which became fully vested on the grant date. PSUs also vest over a pre-determined period of time, minimally three years, but are further subject to the achievement of certain business performance criteria being met during the vesting period. Based upon the level of achieved performance, the number of shares actually awarded can vary from 0% to 150% of the original grant.

There were 1,534,058 RSUs outstanding as of December 31, 2017. All outstanding RSUs as of December 31, 2017 vest within three years of their date of grant. We generally recognize compensation expense for our RSU awards ratably over the service period. Also outstanding as of December 31, 2017 were 3,531,312 PSUs. All outstanding PSUs as of December 31, 2017 vest at the end of their respective performance periods subject to the level of achievement of the performance targets associated with such awards. Upon vesting, all of the remaining RSU and PSU awards will be converted into the right to receive one share of common stock of the Company for each unit that vests. The cost of these awards is determined using the fair value of the shares on the date of grant, and compensation expense is generally recognized over the period during which the employee provides the requisite service to the Company. We generally recognize compensation expense for our PSU awards ratably over the performance period based on management’s judgment of the likelihood that performance measures will be attained.

A summary of the changes in the RSUs outstanding under the Plan during 2017 is presented below:



	Stock Units		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2016	1,910,669		$	7.23
Granted	438,521		$	12.65
Vested and distributed	(691,319	)	$	6.21
Vested and deferred distributed	(38,042	)	$	9.46
Forfeited and cancelled	(85,771	)	$	8.66
Outstanding at December 31, 2017	1,534,058		$	9.10
Vested and deferred at December 31, 2017⁽¹⁾	326,835		$	9.16


(1)	Included in outstanding at December 31, 2017. Vested and deferred RSUs are primarily related to deferred compensation for non-employee directors.

For the years ended December 31, 2016 and 2015, we granted 516,739 and 668,619 shares of RSUs, respectively. The weighted-average grant date fair value of our RSUs was $12.65, $8.05, and $7.58 for the years ended December 31, 2017, 2016 and 2015, respectively. The fair value of RSUs that vested during the years ended December 31, 2017, 2016 and 2015 was $5.5 million, $5.2 million and $10.3 million, respectively. As of December 31, 2017, we have unrecognized compensation expense related to RSUs of $4.6 million. The unrecognized compensation expense related to RSUs will be recognized over a weighted-average period of 1.8 years.

A summary of the changes in the PSUs outstanding under the Plan during 2017 is presented below:



	Stock Units		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2016	4,281,792		$	7.09
Granted	706,732		$	12.75
Vested	(1,502,327	)	$	6.16
Forfeited and cancelled	(131,465	)	$	8.24
Other - increase due to performance of PSU's	176,580		$	11.72
Outstanding at December 31, 2017	3,531,312		$	8.82

For the years ended December 31, 2016 and 2015 we granted 1,013,242 and 1,017,702 shares of PSUs, respectively. For the years ended December 31, 2017, 2016 and 2015, 1,502,327, 1,072,692 and 697,172 shares of PSUs vested, respectively. The weighted-average grant date fair value of our PSUs was $12.75, $7.65, and $7.52 for the years ended December 31, 2017, 2016 and 2015, respectively. The fair value of PSUs that vested during the years ended December 31, 2017, 2016 and 2015 was $9.3 million, $8.1 million and $5.4 million respectively. As of December 31, 2017, we have unrecognized compensation expense related to PSUs of $11.2 million. The unrecognized compensation expense related to PSUs will be recognized over a weighted-average period of 1.7 years.