NetSpend 2015 Annual Report Download - page 81

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Stock Option Awards
During 2015, 2014 and 2013, the Company granted stock options to key TSYS executive officers and non-
management members of its Board of Directors. The grants to key TSYS executive officers were issued for
services to be provided in the future and vest over a period of three years. The grants to the Board of Directors
were fully vested on the date of grant. The average fair value of the options granted was estimated on the date
of grant using the Black-Scholes-Merton option-pricing model.
On July 1, 2013, the Company issued 1,060,148 stock option replacement awards with a market value of $13.7
million as part of the NetSpend acquisition. The weighted average fair value of the options was $12.93 and was
calculated on the date of grant using a conversion factor into equivalent shares of the Company’s common stock
on the acquisition date. The grants vest over a period ranging from seven months to 45 months. The weighted
average fair value of the option grants was estimated on the date of grant using the Black-Scholes-Merton
option-pricing model with the following weighted average assumptions: exercise price of $11.68; risk-free
interest rate of 1.31%; expected volatility of 29.22%; expected term of 4.7 years; and dividend yield of 1.63%.
The following table summarizes the weighted average assumptions, and the weighted average fair value of the
options:
2015 2014 2013
Number of options granted ....................................... 613,473 1,046,372 1,939,796
Weighted average exercise price .................................. $ 39.01 $ 30.96 $ 17.42
Risk-free interest rate ............................................ 1.73% 2.01% 1.31%
Expected volatility .............................................. 20.80% 25.06% 26.81%
Expected term (years) ........................................... 6.3 6.5 6.0
Dividend yield .................................................. 1.04% 1.29% 1.64%
Weighted average fair value ...................................... $ 8.27 $ 7.66 $ 9.48
A summary of TSYS’ stock option activity as of December 31, 2015, 2014 and 2013, and changes during the years
ended on those dates is presented below:
2015 2014 2013
(in thousands, except per share data) Options
Weighted
Average
Exercise
Price Options
Weighted
Average
Exercise
Price Options
Weighted
Average
Exercise
Price
Options:
Outstanding at beginning of year ........... 4,892 $23.83 5,752 $20.96 6,065 $21.27
Granted 1............................... 613 39.01 1,046 30.96 1,940 17.42
Exercised ............................... (2,586) 22.68 (1,850) 18.79 (2,177) 18.75
Forfeited/canceled ....................... (32) 20.79 (56) 28.88 (76) 16.78
Outstanding at end of year ................. 2,887 $28.07 4,892 $23.83 5,752 $20.96
Options exercisable at year-end ............. 1,439 $25.17 2,781 $22.86 3,232 $23.02
Weighted average fair value of options
granted during the year .................. $ 8.27 $ 7.66 $ 9.48
1 Includes the issuance of approximately 1.1 million stock option replacement awards in connection with the acquisition of
NetSpend in 2013. These awards had a market value of $13.7 million. A portion of the expense associated with these
awards has been included as a component of the total purchase price of the NetSpend acquisition. Refer to Note 24.
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