3M 2012 Annual Report Download - page 119

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The following table summarizes restricted stock and restricted stock unit activity during the twelve months ended
December 31, 2012:
Restricted Stock and Restricted Stock Units
2012
2011
2010
Weighted
Average
Weighted
Average
Weighted
Average
Number of
Grant Date
Number of
Grant Date
Number of
Grant Date
Awards
Fair Value
Awards
Fair Value
Awards
Fair Value
Nonvested balance —
As of January 1
4,858,972
$
73.02
4,812,657
$
68.75
4,379,480
$
68.85
Granted
Annual
968,522
87.92
889,448
89.46
902,549
78.81
Other 99,337
85.07
351,624
87.07
527,823
70.09
Vested
(2,594,468)
63.51
(1,077,816)
72.21
(948,233)
79.12
Forfeited
(70,801)
82.65
(116,941)
72.01
(48,962)
76.22
As of December 31 3,261,562
$ 85.17
4,858,972
$ 73.02
4,812,657
$ 68.75
As of December 31, 2012, there was $79 million of compensation expense that has yet to be recognized related to non-
vested restricted stock and restricted stock units. This expense is expected to be recognized over the remaining weighted-
average vesting period of 25 months. The total fair value of restricted stock and restricted stock units that vested during
the twelve months ended December 31, 2012, 2011 and 2010 was $228 million, $102 million and $75 million,
respectively. The Company’s actual tax benefits realized for the tax deductions related to the vesting of restricted stock
and restricted stock units for the twelve months ended December 31, 2012, 2011 and 2010 was $86 million, $36 million
and $20 million, respectively.
Restricted stock units granted under the 3M 2008 Long-Term Incentive Plan generally vest three years following the grant
date assuming continued employment. The one-time “buyout” restricted stock unit grant in 2007 vested at the end of five
years. Restricted stock unit grants issued in 2008 and prior did not accrue dividends during the vesting period. Beginning
in 2009, dividend equivalents equal to the dividends payable on the same number of shares of 3M common stock accrue
on these restricted stock units during the vesting period, although no dividend equivalents are paid on any of these
restricted stock units that are forfeited prior to the vesting date. Dividends are paid out in cash at the vest date on
restricted stock units, except for performance shares which do not earn dividends. Since the rights to dividends are
forfeitable, there is no impact on basic earnings per share calculations. Weighted average restricted stock unit shares
outstanding are included in the computation of diluted earnings per share.
Performance Shares
Beginning in 2008, the Company grants certain members of executive management performance shares on an annual
basis. The performance criteria, which were modified in 2010, are designed to focus management attention on three key
factors that create long-term stockholder value: Organic Sales Volume Growth, Return on Invested Capital and sales from
new products. The number of shares of 3M common stock that could actually be delivered at the end of the three-year
performance period may be anywhere from 0% to 200% of each performance share granted, depending on the
performance of the Company during such performance period. Non-substantive vesting requires that expense for the
performance shares be recognized over one or three years depending on when each individual became a 3M executive.
The first performance shares, which were granted in 2008, were distributed in 2011. Performance shares do not accrue
dividends during the performance period. Therefore, the grant date fair value is determined by reducing the closing stock
price on the date of grant by the net present value of dividends during the performance period. As a result of the
significant uncertainty due to the economic crisis of 2008-2009, the Company granted restricted stock units instead of
performance shares in 2009. Therefore, since there were no performance shares in 2009, there were also no related
distributions in 2012. Performance share grants resumed in 2010 and continued thereafter.
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