Waste Management 2007 Annual Report Download - page 134

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Stock options — Prior to 2005, stock options were the primary form of equity-based compensation we granted
to our employees. On December 16, 2005, the Management Development and Compensation Committee of our
Board of Directors approved the acceleration of the vesting of all unvested stock options awarded under our stock
incentive plans effective December 28, 2005. The decision to accelerate the vesting of outstanding stock options
was made primarily to reduce the future non-cash compensation expense that we would have otherwise recorded as
a result of our January 1, 2006 adoption of SFAS No. 123(R). We estimate that the acceleration eliminated
approximately $55 million of cumulative pre-tax compensation charges that would have been recognized during
2006, 2007 and 2008 as the stock options would have continued to vest. We recognized a $2 million pre-tax charge
to compensation expense during the fourth quarter of 2005 as a result of the acceleration, but do not expect to
recognize future compensation expense for the accelerated options under SFAS No. 123(R).
A summary of our stock options is presented in the table below (shares in thousands):
Shares
Weighted
Average
Exercise
Price Shares
Weighted
Average
Exercise
Price Shares
Weighted
Average
Exercise
Price
2007 2006 2005
Years Ended December 31,
Outstanding, Beginning of year . . . . 21,779 $29.52 33,004 $28.06 41,971 $27.53
Granted ..................... 17 $38.47 88 $37.42 30 $29.17
Exercised(a) . . . ............... (5,252) $25.96 (10,820) $24.47 (5,938) $22.58
Forfeited or expired ............ (1,924) $40.75 (493) $43.47 (3,059) $31.45
Outstanding, End of year(b) ...... 14,620 $29.33 21,779 $29.52 33,004 $28.06
Exercisable, End of year ......... 14,618 $29.33 21,694 $29.49 33,004 $28.06
(a) The aggregate intrinsic value of stock options exercised during the years ended December 31, 2007, 2006 and
2005 was $62 million, $112 million and $41 million, respectively.
(b) Stock options outstanding as of December 31, 2007 have a weighted average remaining contractual term of
3.9 years and an aggregate intrinsic value of $88 million based on the market value of our common stock on
December 31, 2007.
We received $135 million and $270 million during the years ended December 31, 2007 and 2006, respectively,
from our employees’ stock option exercises. We also realized tax benefits from these stock option exercises during
the years ended December 31, 2007 and 2006 of $24 million and $42 million, respectively. These amounts have
been presented in the “Cash flows from financing activities” section of our Consolidated Statements of Cash Flows.
Exercisable stock options at December 31, 2007, were as follows (shares in thousands):
Range of Exercise Prices Shares
Weighted Average
Exercise Price
Weighted Average
Remaining Years
$13.31-$20.00 .............................. 2,489 $18.66 4.30
$20.01-$30.00 .............................. 9,126 $26.92 4.69
$30.01-$40.00 .............................. 1,126 $35.73 1.26
$40.01-$50.00 .............................. 493 $47.22 0.72
$50.01-$56.44 .............................. 1,384 $52.85 0.76
$13.31-$56.44 .............................. 14,618 $29.33 3.85
99
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)