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PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)
61
The following table summarizes information about stock options outstanding and exercisable at December 31, 2010:
Options Outstanding
Range of per share
exercise prices Number
Per share weighted
average exercise
price
Weighted
average
remaining
contractual
life
$22.09 - $30.99 2,872,713 $23.33 8.5 years
$31.00 - $36.99 3,743,413 $34.64 4.1 years
$37.00 - $42.99 4,265,081 $41.13 3.2 years
$43.00 - $48.03 3,625,315 $46.92 4.7 years
14,506,522 $37.38 4.9 years
Options Exercisable
Range of per share
exercise prices Number
Per share weighted
average exercise
price
$22.09 - $30.99 453,899 $24.76
$31.00 - $36.99 2,892,499 $33.99
$37.00 - $42.99 4,265,081 $41.13
$43.00 - $48.03 3,375,098 $46.90
10,986,577 $40.35
We estimate the fair value of stock options using a Black-Scholes valuation model. Key input assumptions used to estimate the fair
value of stock options include the volatility of our stock, the risk-free interest rate and our dividend yield. Our estimates of stock
volatility are based on historical price changes of our stock. The risk-free interest rate is based on U.S. treasuries with a term equal to
the expected option term. The expected life, or holding period, of the award is based on historical experience.
We believe that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in estimating
the fair value of our stock option grants. Estimates of fair value are not intended to predict actual future events or the value ultimately
realized by employees who receive equity awards, and subsequent events are not indicative of the reasonableness of the original
estimates of fair value.
The fair value of stock options granted and related assumptions are as follows:
Years ended December 31,
2010 2009 2008
Expected dividend yield 6.1% 4.5% 3.0%
Expected stock price volatility 25.6% 21.4% 12.3%
Risk-free interest rate 3.2% 2.4% 2.7%
Expected life – years 7.3 7.5 5.0
Weighted average fair value per option granted $2.82 $3.04 $3.22
Restricted Stock Awards and Restricted Stock Units
Our stock plan permits the issuance of restricted stock awards and restricted stock units. Restricted stock awards are subject to one or
more restrictions, which may include continued employment over a specified period or the attainment of specified financial
performance goals. Where a restricted stock award is subject to attainment of financial performance goals and subsequent tenure, if
the performance objectives are achieved, the restrictions would be released, in total or in part, only if the executive is still employed
by us at the end of the service period. Where the sole restriction of a restricted stock award is continued employment over a specified