ADT 2012 Annual Report Download - page 185

As of September 28, 2012, there was approximately $7 million of total unrecognized compensation expense
related to non-vested stock options granted under the Company’s share option plan. This expense, net of
forfeitures is expected to be recognized over a weighted-average period of approximately 2.6 years. Of the
3.3 million unvested shares, the Company estimates that approximately 3.0 million will vest.
Use of a valuation model requires management to make certain assumptions with respect to selected model
inputs. When measuring the fair value immediately before and after the modification, specific consideration is
given to the assumptions used in the Black-Scholes option pricing model. Fair value immediately before the
modification is measured based on the assumptions of Tyco whereas the fair value of ADT options immediately
after the separation is representative of ADT. The weighted-average assumptions used in the Black-Scholes
pricing model for options converted on September 28, 2012 were as follows:
Risk-free interest rate ............................. 1.01 – 1.21%
Expected life of options (years) ..................... 5.5–6.5
Expected annual dividend yield ..................... 1.42%
Expected stock price volatility ...................... 33%
Restricted Stock Units—Restricted stock units are granted subject to certain restrictions. Conditions of
vesting are determined at the time of grant under the Plan. Restrictions on the award generally lapse upon normal
retirement, if more than twelve months from the grant date, and death or disability of the employee. Recipients of
restricted stock units have no voting rights and receive dividend equivalent units. Dividend equivalent units are
subject to forfeiture if the underlying awards do not vest. Included in the total number of restricted stock units
issued are approximately 0.6 million deferred stock units, all of which are vested as of September 28, 2012.
The fair market value of restricted stock units, both time vesting and those subject to specific performance
criteria, are expensed over the period of vesting. Restricted stock units that vest based upon passage of time
generally vest over a period of four years. The fair value of restricted stock units was determined based on the
closing market price of the underlying stock on the grant date. Restricted stock units that vest dependent upon
attainment of various levels of performance that equal or exceed targeted levels generally vest in their entirety
three years from the grant date.
As of September 28, 2012, there were approximately 2.6 million shares of non-vested restricted stock units
outstanding. These shares had a weighted-average grant-date fair value of $20.86.
As of September 28, 2012, there was $13 million of total unrecognized compensation cost related to
non-vested restricted stock units. This expense, net of forfeitures is expected to be recognized over a weighted-
average period of approximately 3 years. Of the 2.6 million unvested shares, the Company estimates that
approximately 2.4 million will vest.
12. Equity
Authorized Capital Stock
Immediately following the Separation, the Company’s authorized capital stock consisted of 1,000,000,000
shares of common stock, par value $0.01 per share, and 50,000,000 shares of preferred stock, par value $0.01 per
share.
Common Stock
Shares Outstanding—On September 28, 2012, Tyco completed a distribution of one common share of ADT
for every two common shares of Tyco. Following the Separation, the Company had 231,094,332 common shares
outstanding at a par value of $0.01 per share.
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