Waste Management 2011 Annual Report Download - page 199

WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
at the end of the deferral period. At December 31, 2011, 2010 and 2009 we had approximately 372,000, 371,000
and 315,000, respectively, vested deferred units outstanding.
Stock Options — Prior to 2005, stock options were the primary form of equity-based compensation we granted
to our employees. In 2010, the Management Development and Compensation Committee decided to re-introduce
stock options as a component of our LTIP awards. All of our stock option awards granted prior to 2010 have vested,
with the exception of any grants pursuant to the reload feature discussed in footnote (a) to the table below. The stock
options granted in 2010 and 2011 primarily vest in 25% increments on the first two anniversaries of the date of
grant and the remaining 50% will vest on the third anniversary. The exercise price of the options is the average of
the high and low market value of our common stock on the date of grant, and the options have a term of 10 years. A
summary of our stock options is presented in the table below (shares in thousands):
Years Ended December 31,
2011 2010 2009
Shares
Weighted
Average
Exercise
Price Shares
Weighted
Average
Exercise
Price Shares
Weighted
Average
Exercise
Price
Outstanding, beginning of year ............. 9,957 $28.95 8,800 $25.98 11,045 $26.97
Granted(a) (b) .......................... 6,597 $37.04 3,901 $33.56 1 $27.90
Exercised(c) ........................... (1,900) $26.46 (2,454) $25.17 (1,285) $30.20
Forfeited or expired ..................... (399) $33.05 (290) $32.88 (961) $39.62
Outstanding, end of year(d) ............... 14,255 $32.91 9,957 $28.95 8,800 $25.98
Exercisable, end of year(e) ................ 5,176 $27.46 6,286 $26.25 8,798 $25.98
(a) Although we stopped granting stock options from 2005 through 2009, some of our outstanding options
granted in 2003 and 2004 have a reload feature that provides for the automatic grant of a new stock option
award when the exercise price of the existing stock option is paid using already owned shares of common
stock. The new option award is for the same number of shares used as payment of the exercise price and has
the same expiration date as the original option that was reloaded.
(b) The weighted average grant-date fair value of stock options granted during the years ended December 31,
2011, 2010 and 2009 was $5.88, $5.83 and $4.03, respectively.
(c) The aggregate intrinsic value of stock options exercised during the years ended December 31, 2011, 2010
and 2009 was $20 million, $25 million and $12 million, respectively.
(d) Stock options outstanding as of December 31, 2011 have a weighted average remaining contractual term of
6.59 years and an aggregate intrinsic value of $29 million based on the market value of our common stock
on December 31, 2011.
(e) The aggregate intrinsic value of stock options exercisable as of December 31, 2011 was $28 million.
We received cash proceeds of $45 million, $54 million and $20 million during the years ended
December 31, 2011, 2010 and 2009, respectively, from our employees’ stock option exercises. We also realized
tax benefits from these stock option exercises during the years ended December 31, 2011, 2010 and 2009 of
$8 million, $10 million and $5 million, respectively. These amounts have been presented as cash inflows in the
“Cash flows from financing activities” section of our Consolidated Statements of Cash Flows.
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