ADT 1999 Annual Report Download - page 49

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and the results of operations of the acquired companies were included
in the consolidated results of the Company from their respective acqui-
sition dates. As a result of the acquisitions, the Company recorded
approximately $3,947.0 million in goodwill and other intangibles.
In connection with these acquisitions, the Company recorded
purchase accounting liabilities of $498.7 million for transaction costs
and the costs of integrating the acquired companies within the various
Tyco business segments. Details regarding these purchase account-
ing liabilities are set forth below. During Fiscal 1998, the Company
spent a total of $4,251.8 million in cash related to the acquisition of
businesses, consisting of $4,154.8 of purchase price (net of cash
acquired) plus $97.0 million of cash for purchase accounting liabilities
related to current and prior years’ acquisitions.
The following table summarizes the purchase accounting
liabilities recorded in connection with the Fiscal 1998 purchase acqui-
sitions:
Severance Facilities Other
Number of Number of
($ in millions) Employees Reserve Facilities Reserve Reserve
Original reserve established 4,800 $159.7 90 $278.9 $ 60.1
Fiscal 1998 activity (1,600) (33.4) (70) (14.2) (51.7)
Fiscal 1999 activity (1,050) (67.0) (3) (48.7) (8.4)
Reversal to goodwill (1,150) (20.4) (4) (69.6) —
Ending balance at September 30, 1999 1,000 $ 38.9 13 $146.4 $ —
ance Sheets. Cash dividends accumulate on a preferred basis,
whether or not earned or declared, at the rate of $3,750 per share per
annum. Upon liquidation, the holders of shares are entitled to receive
an amount equal to $100,000 per share, plus any unpaid dividends.
These preference shares may be redeemed by the subsidiary at any
time on or after December 31, 2008 at a price per share of $100,000,
plus unpaid dividends, adjusted for certain increases in the value of
Tyco’s stock, as defined.
Fiscal 1997
In addition to the mergers discussed in Note 2, in Fiscal 1997 the Com-
pany acquired companies in each of its business segments for an
aggregate of $1,523.7 million, consisting of $1,415.2 million in cash,
the issuance of approximately 3.8 million common shares valued at
$92.8 million and the assumption of approximately $15.7 million in
debt. The cash portions of the acquisition costs were funded utilizing
cash on hand, net proceeds from the sale of common shares of
$645.2 million, and borrowings under the Company’s uncommitted
lines of credit. Each of these acquisitions was accounted for as a pur-
chase, and the results of operations of the acquired companies were
included in the consolidated results of the Company from their respec-
tive acquisition dates. As a result of the acquisitions, approximately
$708.7 million in goodwill and other intangibles, net of the write-off of
purchased in-process research and development, was recorded by
the Company. In connection with the acquisition of AT&T Corp.’s sub-
marine systems business, the Company allocated $361.0 million of
the purchase price to in-process research and development projects
that had not reached technological feasibility and had no probable
alternative future uses. As of September 30, 1999, the payout for
employee severance and consolidation of facilities related to these
acquisitions was substantially complete.
In 1995, as a result of the sale of a business in the United King-
dom, the Company holds a subordinated, non-collateralized zero
coupon loan note maturing in 2004 (“Vendor Note”), together with a
10% interest in the ordinary share capital of the issuer. The Vendor
Note has a £120.8 million ($199.2 million) aggregate principal amount
at maturity with an issue price of $83.9 million, reflecting a yield to
Purchase accounting liabilities recorded during Fiscal 1998 con-
sist of $60.1 million for transaction and other direct costs, $159.7 mil-
lion for severance and related costs and $278.9 million for costs
associated with the shut down and consolidation of certain acquired
facilities. The $159.7 million of severance and related costs covers
employee termination benefits for approximately 4,800 employees
located throughout the world, consisting primarily of manufacturing
employees to be terminated as a result of the shut down and consoli-
dation of production facilities and, to a lesser extent, technical, sales
and administrative employees. At September 30, 1999, approximately
2,650 employees had been terminated and $38.9 million in severance
and related costs remained on the balance sheet. The Company
expects that the remaining employee terminations will be completed
in Fiscal 2000.
The $278.9 million of exit costs are associated with the closure
and consolidation of facilities involving approximately 90 facilities
located primarily in the United States and Europe. These facilities
include manufacturing plants, warehouses, office buildings and sales
offices. Included within these costs are accruals for non-cancelable
leases associated with certain of these facilities. Approximately
73 facilities, mainly office buildings and sales offices, had been
shut down as of September 30, 1999. The remaining facilities primarily
include large manufacturing plants, which are expected to be shut
down in Fiscal 2000. Expenses in connection with the closure of these
remaining facilities, as well as the expiration of non-cancelable leases
(less any expected sublease income for facilities already closed),
comprise the approximately $146.4 million for facility related costs
remaining on the balance sheet as of September 30, 1999.
In July 1998, the Company acquired the U.S. operations of
Crosby Valve, Inc. in exchange for 1,254 cumulative dividend prefer-
ence shares of a newly created subsidiary, valued at $125.4 million.
The subsidiary has authorized 2,000 cumulative dividend preference
shares. The holders of these preference shares have the option to
require the Company to repurchase the preference shares at par value
plus unpaid dividends at any time after July 2001. The outstanding
preference shares were issued at $100,000 par value each and have
been classified in other long-term liabilities on the Consolidated Bal-