ADT 2007 Annual Report Download - page 53

increased responsibility as President of ADT Worldwide. The business segment performance measures
for Mr. Gursahaney are described in the table below, and are also before special items.
Although the Company’s operating plan for full-year 2007 was established in November 2006, the
Board recognized that the Separation would make it difficult to set appropriate full year measures. As
a result, in April 2007, the Compensation Committee approved the implementation of corporate
performance measures and goals for the second half of fiscal year 2007 that were consistent with the
previously approved operating plan. For corporate employees, performance measures that excluded
interest and tax expense of the Company replaced earnings per share and free cash flow before special
items, as management and the Compensation Committee recognized that these expenses would be
difficult to estimate in light of the Separation. In addition, the results of Covidien and Tyco Electronics
were excluded. Because Mr. Gursahaney played a significant role in corporate planning activities in
addition to his business unit role, the performance measures that applied to him were unique.
Mr. Gursahaney’s performance measures were 50% weighted on the performance of the Company (i.e.,
those performance measures applicable to corporate-level employees) and 50% weighted on the
performance of Tyco Engineered Products and Services (pre-Separation) and ADT Worldwide
(post-Separation). The table below summarizes the performance measures and weights for both
corporate and non-corporate employees:
Tyco Fiscal Year 2007 Annual Incentive Compensation Design Summary
Performance Actual
Time Period Performance Measure(1) Weights Target Performance
Messrs. Breen, Coughlin, Evard and Davidson
First half fiscal 2007 • Earnings per Share before special items 50% $0.92 per share $0.95 per share
(EPS) including Covidien and Tyco
Electronics
• Free Cash Flow (FCF) before special items 50% $929.0 million $1,264.0 million
including Covidien and Tyco Electronics
Second half • Operating Income before special items 50% $895.0 million $954.0 million
fiscal 2007 excluding Covidien and Tyco Electronics
• FCF before interest and tax and other 50% $1,060.0 million $1,369.1 million
special items excluding Covidien and Tyco
Electronics
Mr. Gursahaney
October 1, 2006 • Corporate first half performance measures 50% See above See above
through May 31, 2007 described above.
• Operating Income before special items of 25% $918.8 million $875.2 million
Tyco Engineered Products and Services
• FCF of Tyco Engineered Products and 25% $715.7 million $661.0 million
Services
June 1, 2007 through • Corporate second half performance 50% See above See above
September 28, 2007 measures described above.
• Operating Income before special items of 25% $1,065.4 million $1,066.6 million
ADT Worldwide
• FCF before special items of ADT Worldwide 25% $1,126.4 million $1,170.8 million
(1) For compensation purposes, EPS, FCF, net income and operating income are adjusted to exclude
the effects of events that the Compensation Committee deems do not reflect of the performance
of the named executive officers. The categories of special items are identified at the time the
performance measure is approved at the beginning of the fiscal year, and generally include charges
and gains related to divestitures, restructurings (including the Separation), and other income or
charges that may mask the underlying operating results and/or business trends of the Company or
business segment, as applicable. To arrive at FCF, operating cash flow is adjusted by removing the
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