Waste Management 2007 Annual Report Download - page 133

(a) The total fair market value of the shares issued upon the vesting of restricted stock units during the years ended
December 31, 2007 and 2006 were $14 million and $7 million, respectively. This amount was not material in
2005.
Performance share units — During the year ended December 31, 2007, we granted approximately 907,000
performance share units. The performance share units are payable in shares of common stock based on the
achievement of certain financial measures, after the end of a three-year performance period. At the end of the three-
year period, the number of shares awarded can range from 0% to 200% of the targeted amount. Performance share
units have no voting rights and performance share units granted prior to 2007 received no dividend equivalents
during the required performance period. Beginning in 2007, dividend equivalents are paid out in cash based on
actual performance at the end of the awards’ performance period. These performance share units are payable to an
employee (or his beneficiary) upon death or disability as if that employee had remained employed until the end of
the performance period, subject to pro-rata vesting upon an employee’s retirement or involuntary termination other
than for cause and subject to forfeiture in the event of voluntary or for-cause termination.
Compensation expense associated with performance share units that continue to vest based on future
performance is measured based on the grant-date fair value of our common stock, net of the present value of
expected dividend payments on our common stock during the vesting period. Compensation expense is recognized
ratably over the performance period based on our estimated achievement of the established performance criteria.
Compensation expense is only recognized for those awards that we expect to vest, which we estimate based upon an
assessment of both the probability that the performance criteria will be achieved and current period and historical
forfeitures.
A summary of our performance share units is presented in the table below (units in thousands):
Units
Weighted
Average
Fair
Value Units
Weighted
Average
Fair
Value Units
Weighted
Average
Fair
Value
2007 2006 2005
Years Ended December 31,
Unvested, Beginning of year .......... 1,391 $29.52 693 $27.05 — N/A
Granted ......................... 907 $37.28 724 $31.93 760 $27.05
Vested(a) ........................ (53) $27.05 — N/A — N/A
Forfeited ........................ (111) $32.86 (26) $30.80 (67) $27.05
Unvested, End of year .............. 2,134 $32.72 1,391 $29.52 693 $27.05
(a) The Company’s performance exceeded the target performance level established for the awards that vested in
2007. Accordingly, we issued approximately 65,000 shares with a fair market value of $2 million upon the
vesting of these awards.
For the years ended December 31, 2007 and 2006, we recognized $31 million and $21 million, respectively, of
compensation expense associated with restricted stock unit and performance share unit awards as a component of
“Selling, general and administrative” expenses in our Consolidated Statement of Operations. Our “Provision for
(benefit from) income taxes” for the years ended December 31, 2007 and 2006 include a related deferred income tax
benefit of $12 million and $8 million, respectively. We have not capitalized any equity-based compensation costs
during the years ended December 31, 2007 and 2006. As of December 31, 2007, we estimate that a total of
approximately $50 million of currently unrecognized compensation expense will be recognized in future periods for
unvested restricted stock unit and performance share unit awards issued and outstanding. This expense is expected
to be recognized over a weighted average period of approximately 1.9 years.
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WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)