ADT 2008 Annual Report Download - page 258

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. Share Plans (Continued)
Except for the changes described, the principal terms and conditions of restricted shares, restricted
units and deferred stock units of the employees remain unchanged from the original grant.
The Company amended the terms of performance based awards granted on November 22, 2005 to
provide for vesting of the remaining awards without regard to the original performance measures. The
original performance awards, which were previously adjusted to reflect the attainment of performance
metrics through fiscal year 2006, were converted to time based restricted stock units of the employer,
with the exception of corporate employees whose outstanding awards were converted to time based
restricted stock units of the three separate companies.
Effective October 1, 2005, the Company adopted the provisions of SFAS No. 123R using the
modified prospective transition method. Under this transition method, the compensation cost
recognized beginning October 1, 2005 includes compensation cost for (i) all share-based payments
granted prior to, but not yet vested as of October 1, 2005, based on the grant-date fair value estimated
in accordance with the original provisions of SFAS No. 123, ‘‘Accounting for Stock-Based
Compensation,’’ and (ii) all share-based payments granted subsequent to September 30, 2005 based on
the grant-date fair value estimated in accordance with the provisions of SFAS No. 123R. Compensation
cost is generally recognized ratably over the requisite service period or period to retirement eligibility,
if shorter.
Total share-based compensation cost recognized during 2008 was $104 million, which includes
$97 million in selling, general and administrative expenses, $3 million in separation costs and $4 million
in discontinued operations. Total share-based compensation cost recognized during 2007 was
$297 million, which includes $155 million in selling, general and administrative expenses, $13 million in
restructuring and asset impairment charges, net, $6 million in separation costs and $123 million in
discontinued operations. Total share-based compensation cost recognized during 2006 was $288 million,
which includes $155 million in selling, general and administrative expenses and $133 million in
discontinued operations. The Company has recognized a related tax benefit associated with its share-
based compensation arrangements during 2008, 2007 and 2006 of $28 million, $78 million and
$85 million, respectively, of which $1 million, $31 million and $41 million is included in discontinued
operations, respectively.
During 2004, the Tyco International Ltd. 2004 Stock and Incentive Plan (the ‘‘2004 Plan’’)
effectively replaced the Tyco International Ltd. Long Term Incentive Plan, as amended as of May 12,
1999 (the ‘‘LTIP I Plan’’), the Tyco International Ltd. Long Term Incentive Plan II (the ‘‘LTIP II
Plan’’), as well as the Tyco International Ltd. 1994 Restricted Stock Ownership Plan for Key Employees
(the ‘‘1994 Plan’’) for all awards effective on and after March 25, 2004. The 2004 Plan provides for the
award of stock options, stock appreciation rights, annual performance bonuses, long term performance
awards, restricted units, restricted stock, deferred stock units, promissory stock and other stock-based
awards (collectively, ‘‘Awards’’).
The 2004 Plan provides for a maximum of 40 million common shares to be issued as Awards,
subject to adjustment as provided under the terms of the 2004 Plan. In addition, any common shares
that have been approved by the Company’s shareholders for issuance under the LTIP Plans but which
have not been awarded thereunder as of January 1, 2004, reduced by the number of common shares
related to Awards made under the LTIP Plans between January 1, 2004 and March 25, 2004, the date
the 2004 Plan was approved by shareholders, (or which have been awarded but will not be issued,
owing to expiration, forfeiture, cancellation, return to the Company or settlement in cash in lieu of
2008 Financials 155