November 23, 2022
Heather Clark or Kevin Woody
United States Securities Exchange Commission
Division of Corporation Finance
100 F Street, NE
Washington, D.C. 20549
Re: ACCO Brands Corporation
Form 10-K for the Year Ended December 31, 2021
Form 8-K furnished August 8, 2022
File No. 001-08454
Dear Ms. Clark or Mr. Woody,
Set forth below are the responses of ACCO Brands Corporation (the “Company”, “We”, “Our”) to the comments of the staff (the “Staff”) of the Division of Corporation Finance of the U.S. Securities and Exchange Commission set forth in the comment letter dated October 26, 2022. For your convenience, the Staff’s comments are included below in bold.
Form 10-K for the Year Ended December 31, 2021
Financial Statements
Notes to Consolidated Financial Statements
7. Stock-Based Compensation Stock Options, page 52
Company’s Response
The Company used the simplified method to estimate the expected term of its stock option awards granted during the years ended December 31, 2021, and December 31, 2020. For stock options granted in the year ended December 31, 2019, the Company used an expected term that was based on historical share option exercises.
A significant change in contractual term from seven years to ten years was made for grants issued in the year 2020 and all future years. Prior to 2020, our stock options had a contractual term of seven years. The Company determined that the use of the simplified method was appropriate for determining the expected term for the stock options granted in 2021 and 2020 because the Company did not have sufficient historical share option exercise experience upon which to reasonably calculate the expected term because of this significant change.
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In addition, all of our stock options granted met the criteria of “plain vanilla” as described within SAB Topic 14D.2, Questions 5 and 6.
We will continue to evaluate whether there is sufficient history to support this assessment with 10-year options. To the extent that we continue to grant stock options, we will enhance our future footnote disclosure in our annual report on Form 10-K as follows:
“The expected life of the Company’s “plain vanilla” stock option awards granted during the year(s) ended December 31, XXXX, reflect the simplified method as prescribed by Staff Accounting Bulletin Topic 14. The simplified method was used because the Company does not believe it has sufficient historical exercise data to provide a reasonable basis for the expected term of its stock option grants. The simplified method will be used until such time as the Company has stock option exercise experience in which to reasonably determine the expected life.”
12. Income Taxes, page 59
Company’s Response
The decrease in our effective tax rate was due to changes in deferred taxes resulting from statutory tax rate changes and a release of an income tax valuation allowance for the year ended December 31, 2021, and not for the year 2020. On page 60, the Company identifies this by disclosing the following:
“For 2021, we recorded income tax expense of $9.5 million on income before taxes of $111.4 million, for an effective tax rate of 8.5%. The decrease in the effective rate versus 2020 was primarily due to beneficial adjustments to deferred taxes resulting from statutory tax rate changes and the release of the valuation allowance on the foreign tax credit carryforward.”
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As reflected per the deferred income taxes table within footnote 12, the valuation allowance decreased $3.0 million, from $55.4 million in 2020 to $52.4 million during 2021. Below is a roll-forward of our valuation allowance account:
In summary, our income tax provision for the year ended December 31, 2021 included an income tax benefit of $11.4 million primarily related to the release of certain valuation allowances and a $6.8 million income tax benefit, net of adjustments to the valuation allowance for such items, related to statutory tax rate changes. To the extent necessary, the Company will enhance its disclosures for income taxes to better reflect any significant impacts to the consolidated financial statements.
19. Commitments and Contingencies, page 72
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Company’s Response
The Company did record $10.7 million of tax credits received. On page 72 of our 2021 Form 10-K, we disclose the fact that we recorded these tax credits as well as how it was recorded:
“In 2021, the Company recorded Tax Credits in the amount of $10.7 million with respect to the finally decided cases as other income/(expense). In addition, the recording of the Tax Credits resulted in additional income tax expense of $3.6 million. The benefit of the Tax Credits realized by the Company has and will be recorded in the Consolidated Statements of Income in the line item “Other expense, net”.
We recorded the $10.7 million of tax credits because we had received both tax credit vouchers and final, favorable court rulings. These tax credits will be fully utilized to primarily offset non-income operating tax liabilities by the year end December 31, 2022.
Form 8-K furnished August 8, 2022
Exhibit 99.1, page 14
Company’s Response
We retitled our “free cash flow” to “adjusted free cash flow” beginning with our third quarter ended September 30, 2022. This is noted in our Form 8-K, Exhibit 99.1, furnished November 7, 2022. We will also ensure this is titled correctly in future filings.
Please let me know if you have any further comments or questions. I can be reached at 847-687-6733 or james.dudek@acco.com.
Sincerely, |
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/s/ James M. Dudek, Jr. | |
James M. Dudek, Jr. | |
Senior Vice President, Corporate Controller | |
and Chief Accounting Officer |
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cc:
Deborah O’Connor, Executive Vice President and Chief Financial Officer, ACCO Brands Corporation
Pamela R. Schneider, Esq., Senior Vice President, General Counsel and Corporate Secretary, ACCO Brands Corporation
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