ADT 2015 Annual Report Download - page 169

FORM 10-K
in conjunction with the Separation. The maximum amount of potential future payments is not determinable as
they relate to unknown conditions and future events that cannot be predicted.
8. Retirement Plans
The Company measures its retirement plans as of its fiscal year end.
Defined Benefit Plans—The Company provides a defined benefit pension plan and certain other
postretirement benefits to certain employees. These plans were frozen prior to Separation and are not material to
the Company’s financial statements. As of September 25, 2015 and September 26, 2014, the fair values of
pension plan assets were $59 million and $62 million, respectively, and the fair values of projected benefit
obligations in aggregate were $87 million and $84 million, respectively. As a result, the plans were underfunded
by approximately $28 million and $22 million at September 25, 2015 and September 26, 2014, respectively, and
were recorded as a net liability in the Consolidated Balance Sheets. Net periodic benefit cost was not material for
fiscal years 2015, 2014 and 2013.
Defined Contribution Retirement Plans— The Company maintains several qualified defined contribution
plans, which include 401(k) matching programs in the U.S., as well as similar matching programs outside the
U.S. Expense for the defined contribution plans is computed as a percentage of participants’ compensation and
was $25 million, $20 million and $20 million for fiscal years 2015, 2014 and 2013, respectively.
Deferred Compensation Plan—The Company maintains a nonqualified Supplemental Savings and
Retirement Plan (“SSRP”), which permits eligible employees to defer a portion of their compensation. A record
keeping account is set up for each participant and the participant chooses from a variety of measurement funds
for the deemed investment of their accounts. The measurement funds correspond to a number of funds in the
Company’s 401(k) plan and the account balance fluctuates with the investment returns on those funds. Deferred
compensation liabilities were $17 million as of September 25, 2015 and September 26, 2014. Deferred
compensation expense was not material for fiscal years 2015, 2014 and 2013.
9. Share Plans
Stock Compensation Plans
Prior to the Separation, the Company adopted The ADT Corporation 2012 Stock Incentive Plan (the
“Plan”). The Plan provides for the award of stock options, stock appreciation rights, annual performance bonuses,
long-term performance awards, restricted units, restricted stock, deferred stock units, promissory stock and other
stock-based awards (collectively, “Awards”). In addition to the incentive equity awards converted from Tyco
awards, the Plan provides for a maximum of 8 million common shares to be issued as Awards, subject to
adjustment as provided under the terms of the Plan.
Stock-based compensation expense is included in selling, general and administrative expenses in the
Consolidated Statements of Operations. The stock-based compensation expense recognized and the associated
tax benefit for fiscal years 2015, 2014 and 2013 are as follows ($ in millions):
2015 2014 2013
Stock-based compensation expense recognized .................. $23 $20 $19
Tax benefit associated with stock-based compensation ............. 9 8 7
Stock Options—Options are granted to purchase common shares at prices that are equal to the fair market
value of the common shares on the date the option is granted. Conditions of vesting are determined at the time of
grant under the Plan. Options granted under the Plan generally vest in equal annual installments over a period of
four years and generally expire 10 years after the date of grant. The grant-date fair value of each option grant is
95