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PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)
63
The following table shows stock-based compensation expense as included in the Condensed Consolidated Statements of
Income:
Years Ended December 31,
2007 2006 2005
Cost of equipment sales ............................................ $ 1,649
$ 1,869 $ 1,845
Cost of support services............................................ 710
806 796
Cost of business services .......................................... 980
1,112 1,111
Selling, general and administrative expense ............. 19,984
22,669 22,526
Research and development expense.......................... 808
919 945
Pre-tax stock-based compensation............................ 24,131
27,375 27,223
Income tax ................................................................ (8,277)
(9,308) (9,256)
Stock-based compensation expense, net....................... $ 15,854
$ 18,067 $ 17,967
Basic earnings per share impact................................ $ 0.07
$ 0.08 $ 0.08
Diluted earnings per share impact................................. $ 0.07
$ 0.08 $ 0.08
Capitalized stock-based compensation costs at December 31, 2007 and 2006 were not material.
At December 31, 2007, $15.3 million of unrecognized compensation cost related to non-vested stock options is expected to
be recognized over a weighted average period of 2.0 years. At December 31, 2007, $15.2 million of unrecognized
compensation cost related to non-vested restricted stock units is expected to be recognized over a weighted average period of
2.8 years.
The total intrinsic value of options exercised during the years ended December 31, 2007, 2006 and 2005, was $28.1 million,
$23.2 million and $21.9 million, respectively. The total intrinsic value of restricted stock units converted during 2007 was
$3.3 million. Proceeds from issuance of stock in our Consolidated Statements of Cash Flows for the years ended December
31, 2007, 2006 and 2005 include $5.0 million, $3.4 million and $3.9 million of windfall tax benefits from stock options
exercised and restricted stock units converted, respectively.
We settle employee stock compensation awards with treasury shares.
Starting in 2006, we modified our stock-based compensation awards, requiring a minimum requisite service period of one
year for retirement eligible employees.
At December 31, 2007, there were 15,416,166 shares available for future grants of stock options and restricted stock units
under our stock plans.
Incentive Awards
Long-term incentive awards are provided to employees under the terms of our plans. The Executive Compensation
Committee of the Board of Directors administers these plans. Awards granted under these plans may include stock options,
restricted stock units, other stock based awards, cash or any combination thereof.
Effective in 2006, we changed the components of our long-term incentive compensation structure. This change increased the
amount of restricted stock units and cash incentive awards issued to employees and reduced the number of stock options
granted.
We have the following stock plans that are described below: the U.S. and U.K. Stock Option Plans (ESP), the U.S. and U.K.
Employee Stock Purchase Plans (ESPP), and the Directors’ Stock Plan.
Stock Options
Under our stock plan, certain officers and employees are granted options at prices equal to the market value of our common
shares at the date of grant. Options granted in 2004 and prior thereto generally became exercisable in three equal installments
during the first three years following their grant and expire after ten years. Options granted in 2005 and thereafter generally
become exercisable in four equal installments during the first four years following their grant and expire ten years from the
date of grant.