Stock-Based Compensation Plans

The following table shows stock-based compensation expense included in the Consolidated Statements of Income:



	Years Ended December 31,
	2016			2015			2014
Cost of equipment sales	$	525		$	998		$	1,004
Cost of software	131			211			95
Cost of support services	394			786			607
Cost of business services	525			845			694
Selling, general and administrative	12,127			16,460			14,028
Research and development	1,180			1,749			1,018
Restructuring	275			—			—
Stock-based compensation expense	15,157			21,049			17,446
Tax benefit	(5,820		)	(8,083		)	(6,699		)
Stock-based compensation expense, net of tax	$	9,337		$	12,966		$	10,747

Stock Plans

We have a long-term incentive program whereby eligible employees may be granted restricted stock units, non-qualified stock options, other stock-based awards, cash or any combination thereof. The Executive Compensation Committee of the Board of Directors administers these plans. We settle employee stock compensation awards with treasury shares. At December 31, 2016, there were 18,361,915 shares available for future grants under our long-term incentive program.

Restricted Stock Units

Restricted stock units (RSUs) entitle the holder to shares of common stock as the units vest, typically over a three year service period. The following table summarizes information about restricted stock units during 2016 and 2015:



	2016				2015
	Shares		Weighted average grant date fair value		Shares		Weighted average grant date fair value
Outstanding - beginning of the year	1,727,214		$	18.30	1,819,239		$	16.41
Granted	826,546		17.20		809,436		21.15
Vested	(822,290	)	19.91		(802,284	)	16.88
Forfeited	(122,011	)	19.97		(99,177	)	17.93
Outstanding - end of the year	1,609,459		$	17.50	1,727,214		$	18.30

The fair value of RSUs is determined based on the stock price on the grant date less the present value of expected dividends. At December 31, 2016, there was $9 million of unrecognized compensation cost related to RSUs that is expected to be recognized over a weighted-average period of 1.6 years. The intrinsic value of RSUs outstanding at December 31, 2016 was $23 million. The intrinsic value of RSUs vested during 2016, 2015 and 2014 was $14 million, $18 million and $18 million, respectively. The fair value of RSUs vested during 2016, 2015 and 2014 was $21 million, $14 million and $10 million, respectively. During 2014, we granted 685,994 RSUs at a weighted average fair value of $23.62.

Non-employee directors receive restricted stock units which are convertible into shares of common stock one year from date of grant. In 2016 and 2015, we granted 54,855 and 12,824 restricted stock units, respectively, to non-employee directors.

Performance Stock Units

The following table summarizes share information about Performance stock units (PSUs) during 2016:



	Years Ended December 31,
	2016		2015
Outstanding - beginning of the year	1,107,515		606,715
Granted	889,599		725,330
Performance adjustments	(1,400,425	)	(188,774	)
Forfeited	(216,791	)	(35,756	)
Outstanding - end of the year	379,898		1,107,515

PSUs are stock awards where the number of shares ultimately received by the employee is conditional upon the attainment of certain performance targets as well as total shareholder return relative to peer companies. PSUs vest at the end of a three-year service period and the actual number of shares awarded may range from 0% to 200% of the target award. However, the final determination of the number of shares to be issued is made by our Board of Directors, who may reduce, but not increase, the ultimate number of shares to be awarded (negative discretion). PSUs are accounted for as variable awards until the end of the service period when the grant date is established.

Total share-based compensation expense for PSUs is determined by the product of the number of shares eligible to be awarded and expected to vest and the fair value of the award, determined using a Monte Carlo simulation model, commencing at the inception of the requisite service period. During the performance period, the compensation expense for PSUs is re-computed using the fair value of the award, determined using a Monte Carlo simulation model each balance sheet date. Due to the variability of these awards, significant fluctuations in share-based compensation expense recognized from one period to the next are possible.

As a result of current year and projected company performance against pre-established targets for the PSU awards, our current estimate of the number of shares that will ultimately be awarded is significantly less than our estimate at the beginning of the year. At December 31, 2016, there was no unrecognized compensation cost related to currently outstanding PSU awards.

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, 2016, there was less than $3 million of unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 2.0 years. The intrinsic value of options outstanding and options exercisable at December 31, 2016 was not significant. No stock options were exercised in 2015 or 2016.

The following table summarizes information about stock option activity during 2016 and 2015:



	2016				2015
	Shares		Per share weighted average exercise prices		Shares		Per share weighted average exercise prices
Options outstanding - beginning of the year	8,771,600		$	31.26	10,708,694		$	34.27
Granted	1,758,760		16.87		200,000		24.79
Canceled	(157,176	)	19.48		(100,200	)	31.59
Expired	(1,250,422	)	42.62		(2,036,894	)	46.42
Options outstanding - end of the year	9,122,762		$	27.13	8,771,600		$	31.26
Options exercisable - end of the year	7,140,772		$	27.47	8,054,932		$	32.14

The following table provides additional information about stock options outstanding and exercisable at December 31, 2016:



	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	3,926,391	$	18.82	6.5	2,197,735	$	20.22	4.6
$23.00 - $30.99	2,511,223	25.26		3.8	2,257,889	25.33		3.23
$31.00 - $45.99	2,055,824	37.89		.88	2,055,824	38.90		.88
$46.00 - $48.03	629,324	48.03		.09	629,324	48.00		.90
	9,122,762	$	27.13	4.1	7,140,772	$	29.66	2.7

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.

The follow table lists the weighted average of assumptions used to calculate the fair value of stock options granted during 2016 and 2015:



	Years Ended December 31,
	2016		2015
Expected dividend yield	4.5	%	3.4	%
Expected stock price volatility	29.0	%	29.0	%
Risk-free interest rate	1.6	%	2.0	%
Expected life	7 years		7.0 years
Weighted-average fair value per option granted	$2.85		$3.38
Fair value of options granted (in thousands)	$5,013		$676

Employee Stock Purchase Plan

We maintain a non-compensatory Employee Stock Purchase Plan that enables substantially all U.S. and Canadian employees to purchase shares of our common stock at an offering price of 95% of the average market price on the offering date. At no time will the exercise price be less than the lowest price permitted under Section 423 of the Internal Revenue Code. Employees purchased 147,680 shares and 131,769 shares in 2016 and 2015, respectively. We have reserved 2,921,057 common shares for future purchase under the ESPP.