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PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share amounts)
88
Stock Options
Stock options may be granted to certain officers and employees at an exercise price equal to or greater than the stock price of our common
stock on the grant date. Options vest ratably over three or four years and expire ten years from the date of grant. At December 31, 2015,
there was less than $1 million of unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-
average period of 2.8 years. The intrinsic value of options outstanding and options exercisable at December 31, 2015 was $3 million and
$2 million, respectively. No stock options were exercised in 2015. The intrinsic value of options exercised during 2014 was not material.
The following table summarizes information about stock option activity during 2015 and 2014:
2015 2014
Shares
Per share
weighted
average
exercise prices Shares
Per share
weighted
average exercise
prices
Options outstanding - beginning of the year 10,708,694 $ 34.27 12,396,894 $ 34.90
Granted 200,000 24.79 ——
Exercised ——
(137,072) 22.78
Canceled (100,200) 31.59 (114,925) 36.05
Expired (2,036,894) 46.42 (1,436,203) 40.06
Options outstanding - end of the year 8,771,600 $ 31.26 10,708,694 $ 34.27
Options exercisable - end of the year 8,054,932 $ 32.14 9,808,694 $ 35.60
The following table provides additional information about stock options outstanding and exercisable at December 31, 2015:
Options Outstanding Options Exercisable
Range of per share exercise prices Shares
Per share
weighted-average
exercise price
Weighted-average
remaining
contractual life Shares
Per share
weighted-average
exercise price
Weighted-average
remaining
contractual life
$13.39 - $22.99 2,290,103 $ 20.23 5.6 years 1,880,102 $ 20.50 5.3 years
$23.00 - $30.99 2,538,566 25.26 4.7 years 2,231,899 25.36 4.1 years
$31.00 - $45.99 3,311,665 40.30 1.2 years 3,311,665 40.30 1.2 years
$46.00 - $48.03 631,266 48.03 1.1 years 631,266 48.03 1.1 years
8,771,600 $ 31.26 3.4 years 8,054,932 $ 32.14 2.9 years
We estimate the fair value of stock options using a Black-Scholes valuation model. Key assumptions used to estimate the fair value of
stock options include the volatility of our stock price, a risk-free interest rate, the expected dividend yield and expected life of the award.
The risk-free interest rate is based on U.S. treasuries with a term equal to the expected option term. The expected stock price volatility,
life of the award and expected dividend yield are based on historical experience. In 2014 there were no stock options granted and in 2013,
we granted 800,000 options at a weighted average exercise price of $21.93.
The fair value of stock options granted during 2015 was determined using the following assumptions:
Expected dividend yield 3.4%
Expected stock price volatility 29.0%
Risk-free interest rate 2.0%
Expected life 7 years
Weighted-average fair value per option granted $3.38
Fair value of options granted (in thousands) $676