ADT 2010 Annual Report Download - page 58

Fiscal 2010 Annual Incentive Compensation Design Summary
Performance Actual
Performance Measure Weights Target Performance
Messrs. Breen and Coughlin, and Ms. Reinsdorf
•Earnings per Share from continuing operations before
special items (‘‘EPS’’) ........................ 45% $2.53 per share $2.73 per share
•Adjusted Free Cash Flow (‘‘Adjusted FCF’’) before
special items ............................... 45% $ 1.00 billion $ 1.57 billion
•Total Revenue (excluding Electrical and Metal Products
revenue) .................................. 10% $ 15.85 billion $ 15.91 billion
Mr. Oliver
•Corporate split equally between Earnings Per Share and
Adjusted FCF .............................. 20% See above See above
•Combined Operating Income of Safety Products,
Electrical and Metal Products and the International
Fire business before special items ................ 35% $ 429 million $ 465 million
•Combined Revenue of Safety Products, Electrical and
Metal Products and the International Fire business . . . . 15% $ 2.75 billion $ 2.87 billion
•Safety Products Working Capital Days ............ 10% 86.0 days 78.3 days
•Electrical and Metal Products Working Capital Days .. 10% 80.6 days 92.7 days
•International Fire Adjusted Free Cash Flow before
special items ............................... 10% $ 79 million $ 129 million
Mr. Gursahaney
•Corporate split equally between Earnings Per Share and
Adjusted FCF .............................. 20% See above See above
•ADT Worldwide Operating Income before special items . 35% $ 1.05 billion $ 1.12 billion
•ADT Worldwide Adjusted FCF before special items . . . 30% $ 0.92 billion $ 1.17 billion
•ADT Worldwide Total Revenue .................. 15% $ 7.29 billion $ 7.33 billion
Description of Performance Measures: For compensation purposes, EPS from continuing
operations, Adjusted FCF, and operating income are adjusted to exclude the effects of events that the
Compensation Committee deems do not reflect 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, although the Compensation Committee may at its discretion make
adjustments during the fiscal year. Special items include gains, losses or cash outlays that may mask the
underlying operating results and/or business trends of the Company or business segment, as applicable.
For fiscal 2010, the approved categories of adjustments included adjustments related to (i) business
acquisitions and disposals; (ii) debt refinancing; (iii) legacy legal and tax matters, (iv) goodwill and
intangible asset impairments, (v) tax law changes, (vi) certain unbudgeted capital expenditures;
(vii) restructuring charges; and (viii) realignments of segment and corporate costs. At the beginning of
the fiscal year, the Compensation Committee also decided that it would be appropriate to limit the
effects of the volatility inherent in the Electrical and Metal Products business segment on the
performance measures applicable to the corporate level. For compensation purposes, this had the effect
of increasing the Company’s Adjusted FCF. Adjusted FCF is calculated by first adjusting cash flow from
operations by removing the effects of the sale of accounts receivable programs, cash paid for purchase
accounting and holdback liabilities, and voluntary pension contributions and then deducting net capital
expenditures (including accounts purchased from the ADT dealer network), and then adding back the
special items that increased or decreased cash flows. Working capital days are generally calculated by
dividing annualized average working capital by revenue of the applicable unit.
The table below shows the maximum and target annual incentive compensation opportunities for
fiscal 2010, and the actual payments earned by each of our named executive officers. These amounts
are reported in the ‘‘Non-Equity Incentive Plan Compensation’’ column of the ‘‘Summary
Compensation’’ table.
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