ADT 2008 Annual Report Download - page 260

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. Share Plans (Continued)
analysis of actual share option forfeitures. The weighted-average assumptions used in the Black-Scholes
option pricing model for 2008, 2007 and 2006 are as follows:
2008 2007 2006
Expected stock price volatility .............................. 27% 30% 34%
Risk free interest rate .................................... 2.93% 4.52% 4.28%
Expected annual dividend per share .......................... $0.62 $0.58 $0.64
Expected life of options (years) ............................. 4.5 4.7 4.2
The weighted-average grant-date fair values of options granted during 2008, 2007 and 2006 was
$11.06, $15.35 and $14.33, respectively. The total intrinsic value of options exercised during 2008, 2007
and 2006 was $16 million, $163 million and $108 million, respectively. The related excess cash tax
benefit classified as a financing cash inflow for 2008, 2007 and 2006 was not significant.
A summary of option activity as of September 26, 2008 and changes during the year then ended is
presented below:
Weighted-
Average Aggregate
Weighted- Remaining Intrinsic
Average Contractual Term Value
Shares Exercise Price (in years) (in millions)
Outstanding at September 28, 2007 ......... 27,844,332 $50.21
Granted ............................ 280,670 41.76
Exercised ........................... (1,385,460) 30.96
Expired ............................. (2,475,272) 64.13
Forfeited ............................ (959,816) 51.38
Outstanding at September 26, 2008 ......... 23,304,454 49.77 5.4 $ 59
Vested and unvested expected to vest at
September 26, 2008 .................. 22,840,383 49.77 5.4 59
Exercisable at September 26, 2008 ......... 18,325,574 49.79 4.6 59
As of September 26, 2008, there was $48 million of total unrecognized compensation cost related
to non-vested options granted. The cost is expected to be recognized over a weighted-average period of
2.4 fiscal years.
Employee Stock Purchase Plans Substantially all full-time employees of the Company’s U.S.
subsidiaries and employees of certain qualified non-U.S. subsidiaries are eligible to participate in an
employee share purchase plan. Eligible employees authorize payroll deductions to be made for the
purchase of shares. The Company matches a portion of the employee contribution by contributing an
additional 15% of the employee’s payroll deduction. All shares purchased under the plan are purchased
on the open market by a designated broker.
Under the SAYE Plan, eligible employees in the United Kingdom are granted options to purchase
shares at the end of three years of service at 85% of the market price at the time of grant. Options
under the SAYE Plan are generally exercisable after a period of three years and expire six months after
the date of vesting. The SAYE Plan provides for a maximum of 10 million common shares to be issued;
as of September 26, 2008, there were 7 million shares available for future issuance. All of the shares
purchased under the SAYE Plan are purchased on the open market.
2008 Financials 157