3M 2004 Annual Report Download - page 95

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69
The ESOP has been the primary funding source for the Company’s employee savings plans. As permitted by
AICPA Statement of Position 93-6, “Employers’ Accounting for Employee Stock Ownership Plans”, the Company
has elected to continue its practices, which are based on Statement of Position 76-3, “Accounting Practices for
Certain Employee Stock Ownership Plans” and subsequent consensus of the EITF of the FASB. Accordingly, the
debt of the ESOP is recorded as debt, and shares pledged as collateral are reported as unearned compensation
in the Consolidated Balance Sheet and Consolidated Statement of Changes in Stockholders’ Equity and
Comprehensive Income. Unearned compensation is reduced symmetrically as the ESOP makes principal
payments on the debt. Expenses related to the ESOP include total debt service on the notes, less dividends. The
Company contributes treasury shares, accounted for at fair value, to employee savings plans to cover obligations
not funded by the ESOP (reported as an employee benefit expense).
Employee Savings and Stock Ownership Plans
(Millions) 2004 2003 2002
Dividends on shares held by the ESOP $33 $ 31 $ 31
Company contributions to the ESOP 15 17 17
Interest incurred on ESOP notes 12 14 16
Amounts reported as an employee benefit expense:
Expenses related to ESOP debt service 11 13 13
Expenses related to treasury shares 45 43 42
ESOP Debt Shares 2004 2003 2002
Allocated 16,200,282 15,494,346 14,815,180
Committed to be released 705,068 546,798 758,374
Unreleased 6,219,328 7,799,513 9,010,504
Total ESOP debt shares 23,124,678 23,840,657 24,584,058
NOTE 14. General Employees’ Stock Purchase Plan (GESPP)
In May 1997, shareholders approved 30 million shares for issuance under the Company’s GESPP. Substantially all
employees are eligible to participate in the plan. Participants are granted options at 85% of market value at the date of
grant. There are no GESPP shares under option at the beginning or end of each year because options are granted on
the first business day and exercised on the last business day of the same month.
General Employees’ Stock
Purchase Plan 2004 2003 2002
Shares
Exercise
Price* Shares
Exercise
Price* Shares
Exercise
Price*
Options granted 1,701,874 $69.65 1,812,055 $57.18 1,865,911 $51.49
Options exercised (1,701,874) 69.65 (1,812,055) 57.18 (1,865,911) 51.49
Shares available for
grant – December 31 13,751,060 15,452,934 17,264,989
*Weighted average
The weighted average fair value per option granted during 2004, 2003 and 2002 was $12.29, $10.09 and $9.09,
respectively. The fair value of GESPP options was based on the 15% purchase price discount.