ADT 2009 Annual Report Download - page 244

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. Share Plans (Continued)
$14 million. Of this amount, $2 million, $7 million ($1 million in discontinued operations) and
$5 million ($2 million in discontinued operations) were recorded in 2009, 2008 and 2007, respectively.
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.
Also in connection with the Separation, 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 utilized the modified prospective transition method to
account for its shared based payment awards. 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 estimated grant-date fair value
and (ii) all share-based payments granted subsequent to September 30, 2005 based on the estimated
grant-date fair value. 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 2009 was $99 million, all of which is
included in selling, general and administrative expenses. 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. The Company has
recognized a related tax benefit associated with its share-based compensation arrangements during
2009, 2008 and 2007 of $25 million, $28 million ($1 million in discontinued operations) and $78 million
($31 million 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’’) and the Tyco International Ltd. Long Term Incentive Plan II (the ‘‘LTIP II
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 shares, 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
common shares on or after January 1, 2004) and which are no longer available for any reason
152 2009 Financials