ADT 2000 Annual Report Download - page 58

FIFTY SIX
The cost of announced workforce reductions of $433.7 million
includes the elimination of 16,139 positions primarily in the United
States and Europe, consisting primarily of manufacturing and dis-
tribution, administrative, research and development and sales and
marketing personnel. The cost of facility closures of $68.6 million
consists primarily of the shut-down and consolidation of 87 facili-
ties primarily in the United States and Europe, consisting primarily
of manufacturing plants, distribution centers, administrative build-
ings, research and development facilities and sales offices. It also
includes $18.3 million related to the write-down of inventory, which
is included in cost of sales. At September 30, 2000, 10,072 employ-
ees had been terminated and 62 facilities had been shut down.
The other charges of $141.0 million consist of transaction costs
of $67.9 million for legal, printing, accounting, financial advisory
services and other direct expenses related to the AMP merger; $88.1
million related to the write-down of inventory, discussed below;
lease termination costs following the merger of $9.6 million; a credit
of $50.0 million related to a litigation settlement with AlliedSignal
Inc.; and other costs of $25.4 million relating to the consolidation
of certain product lines and other non-recurring charges related to
the AMP merger.
As part of the integration of AMP’s electronics business and
AMP’s profit improvement plan, the Company evaluated the prof-
itability and anticipated customer demand for its various products.
As a result of this evaluation, management decided to exit certain
product lines and/or businesses which were under-performing rela-
tive to expectations. The inventory held by the Company related to
these exited activities was deemed impaired and written down to
estimated fair value. The total write-down of $88.1 million was
recorded as a charge to cost of sales. These discontinued product
lines represented approximately $150 million of historical net sales
for AMP on an annualized basis.
The Healthcare and Specialty Products segment recorded net
merger, restructuring and other non-recurring charges of $419.1 mil-
lion, consisting of a $423.8 million charge primarily related to the
merger with USSC and a $4.7 million credit representing a revision
of estimates related to Tyco’s 1997 restructuring and other non-
recurring accruals discussed below. The following table provides
information about these charges, in addition to revision in estimates
of Fiscal 1999 charges:
SEVERANCE FACILITI ES OTHER
NUMBER OF NU M BER OF
($ IN M I LLIONS) EMPLOYEES RESERVE FACILITIES RESERVE RESERVE TOTAL
Fiscal 1999 charges 1,467 $124.8 45 $ 51.8 $ 247.2 $ 423.8
Fiscal 1999 activity (1,282) (99.3) (20) (18.3) (217.6) (335.2)
Fiscal 2000 revision in estimates — (4.2) (1) (4.5) (11.0) (19.7)
Fiscal 2000 utilization (91) (14.8) (17) (10.7) (18.6) (44.1)
Ending balance at September 30, 2000 94 $ 6.5 7 $ 18.3 $ — $ 24.8
the actions under Tyco’s 1997 restructuring and other non-recurring
plans are completed or near completion and have resulted in total
estimated costs being less than originally anticipated.
1998 CHARGES AND CREDIT
During the fourth quarter of Fiscal 1998, AMP recorded charges of
$185.8 million associated with its profit improvement plan, which
includes the reduction of support staff throughout all its business
units and the consolidation of manufacturing plants and other facil-
ities, in addition to certain sales growth initiatives. These charges
include the cost of staff reductions of $172.1 million involving the
voluntary retirement and involuntary termination of approximately
2,700 staff support personnel and 700 direct manufacturing
employees, and the cost of consolidation of certain facilities of $13.7
million relating to six plant and facility closures and consolidations.
At September 30, 1999, these restructuring activities were sub-
stantially completed. See Note 18 for discussion of the voluntary
early retirement program.
During the first quarter of Fiscal 1998, AMP recorded a credit
of $21.4 million to merger, restructuring and other non-recurring
charges representing a revision of estimates related to its 1996
restructuring activities, which were completed in Fiscal 1998.
During the fourth quarter of Fiscal 1998, USSC recorded cer-
tain charges of $80.5 million. These charges include $70.9 million
of costs to exit certain businesses representing the write down of
assets from earlier purchases of technology that had minimal com-
mercial application and the adjustment to net realizable value of
certain assets. In addition, merger costs of $9.6 million were
recorded that represent legal and insurance costs related to the
merger consummated in the first quarter of Fiscal 1999. During the
The cost of announced workforce reductions of $124.8 million
includes the elimination of 1,467 positions primarily in the United
States and Europe, consisting primarily of manufacturing and dis-
tribution, sales and marketing, administrative and research and
development personnel. The cost of facility closures of $51.8 mil-
lion includes the shut-down and consolidation of 45 facilities pri-
marily in Europe and the United States, consisting primarily of
manufacturing plants, distribution centers, sales offices, adminis-
trative buildings and research and development facilities. At Sep-
tember 30, 2000, 1,373 employees had been terminated and 37
facilities had been shut down.
The other charges of $247.2 million consist of transaction costs
of $53.3 million for legal, printing, accounting, financial advisory
services and other direct expenses related to the USSC merger, lease
termination costs following the merger of $156.8 million and other
costs of $37.1 million relating to the consolidation of certain prod-
uct lines and other non-recurring charges primarily related to the
USSC merger. The lease termination costs of $156.8 million relate
to the USSC North Haven facility that was purchased by Tyco sub-
sequent to the merger (See Note 2).
The remaining balance at September 30, 2000 of $24.8 million
is included in other current liabilities in the Consolidated Balance
Sheet. The Company currently anticipates that the restructuring and
other non-recurring activities to which all of these charges relate will
be completed within Fiscal 2001.
In Fiscal 1999, the Company recorded a credit of $31.9 million,
including $27.2 million in the Fire and Security Services segment
and $4.7 million in the Healthcare and Specialty Products segment
referred to above, representing a revision of estimates related to
Tyco’s 1997 restructuring and other non-recurring accruals. Most of