ADT 2000 Annual Report Download - page 59

FIFTY SEVEN
first quarter of Fiscal 1998, USSC recorded restructuring charges of
$12.0 million related to employee severance costs, facility disposals
and asset write-downs as part of USSC’s cost cutting program. USSC
substantially completed its 1998 restructuring activities during
Fiscal 1999.
[1 7 ] Commitments and Contingencies
The Company occupies certain facilities under leases that expire at
various dates through the year 2030. Rental expense under these
leases and leases for equipment was $442.7 million, $381.0 million
and $331.7 million for Fiscal 2000, Fiscal 1999 and Fiscal 1998,
respectively. At September 30, 2000, the minimum lease payment
obligations under noncancelable operating leases were as follows:
$435.7 million in Fiscal 2001, $335.4 million in Fiscal 2002,
$239.5 million in Fiscal 2003, $170.4 million in Fiscal 2004, $142.7
million in Fiscal 2005 and an aggregate of $431.4 million in Fiscal
years 2006 through 2030.
In the normal course of business, the Company is liable for
contract completion and product performance. In the opinion of
management, such obligations will not significantly affect the
Company’s financial position or results of operations.
The Company is involved in various stages of investigation and
cleanup related to environmental remediation matters at a number
of sites. The ultimate cost of site cleanup is difficult to predict given
the uncertainties regarding the extent of the required cleanup, the
interpretation of applicable laws and regulations and alternative
cleanup methods. Based upon the Company’s experience with envi-
ronmental remediation matters, the Company has concluded that
there is at least a reasonable possibility that remedial costs will be
incurred with respect to these sites in an aggregate amount in the
range of $32.9 million to $95.2 million. At September 30, 2000, the
Company concluded that the most probable amount that will be
incurred within this range is $68.3 million. $35.4 million of such
amount is included in accrued expenses and other current liabilities
and $32.9 million is included in other long-term liabilities in the
Consolidated Balance Sheet. Based upon information available to
the Company, at those sites where there has been an allocation of
the liability for cleanup costs among a number of parties, including
the Company, and such liability could be joint and several, man-
agement believes it is probable that other responsible parties will
fully pay the cost allocated to them, except with respect to one site
for which the Company has assumed that one of the identified
responsible parties will be unable to pay the cost allocated to it and
that such party’s cost will be reapportioned among the remaining
responsible parties. In view of the Company’s financial position and
reserves for environmental matters of $68.3 million, the Company
has concluded that its payment of such estimated amounts will not
have a material effect on its financial position, results of operations
or liquidity.
The Company is a defendant in a number of other pending legal
proceedings incidental to present and former operations, acquisi-
tions and dispositions. The Company does not expect the outcome
of these proceedings, either individually or in the aggregate, to have
a material adverse effect on its financial position, results of opera-
tions or liquidity.
[1 8 ] Retirement Plans
DEFINED BENEFIT PENSION PLANS
The Company has a number of noncontributory and contributory
defined benefit retirement plans covering certain of its U.S. and
non-U.S. employees, designed in accordance with conditions and
practices in the countries concerned. Contributions are based on
periodic actuarial valuations which use the projected unit credit
method of calculation and are charged to the Consolidated State-
ments of Operations on a systematic basis over the expected aver-
age remaining service lives of current employees. The net pension
expense is assessed in accordance with the advice of professionally
qualified actuaries in the countries concerned or is based on sub-
sequent formal reviews for the purpose. The Company’s funding
policy is to make annual contributions to the extent such contribu-
tions are tax deductible as actuarially determined. The benefits
under the defined benefit plans are based on years of service and
compensation.
VOLUNTARY EARLY RETIREMENT PROGRAMS
In the fourth quarter of Fiscal 1998, AMP offered enhanced
retirement benefits to targeted groups of employees. The cost of
these benefits totaled $138.3 million and was recorded as part of
AMP’s fourth quarter restructuring charge. This amount has not
been included in the determination of net periodic pension cost
presented below. The net periodic pension (income) cost for all
U.S. and non-U.S. defined benefit pension plans includes the
following components:
U.S. PLANS
(I N MILLI ONS) 2 00 0 1 9 9 9 19 9 8
Service cost $ 1 2 .1 $ 37.8 $ 44.7
Interest cost 8 4 .6 86.2 93.3
Expected return on plan assets (1 1 2 .8 ) (96.1) (109.9)
Recognition of initial net asset (1 .0 ) (0.9) (1.9)
Amortization of prior service cost 0 .7 3.0 3.2
Recognized net actuarial gain (6 .4 ) (0.6) (7.1)
Curtailment/settlement gain (4 .6 ) (102.6) (48.6)
Net periodic benefit income $ (2 7 .4 ) $ (73.2) $ (26.3)
NON-U.S. PLANS
(I N MILLI ONS) 2 00 0 1 9 9 9 19 9 8
Service cost $ 6 0 .9 $ 47.4 $ 35.6
Interest cost 7 5 .1 48.0 43.1
Expected return on plan assets (8 5 .3 ) (56.8) (53.6)
Recognition of initial net obligation 0 .2 0.1 —
Amortization of prior service cost 0 .8 0.6 0.6
Recognized net actuarial loss (gain) 2 .3 1.1 (0.8)
Curtailment/settlement (gain) loss (2 .7 ) 1.2 6.7
Net periodic benefit cost $ 5 1 .3 $ 41.6 $ 31.6
The curtailment/settlement gains in Fiscal 1999 relate primar-
ily to the termination of employees at AMP and the freezing of AMP’s
pension plan. The curtailment/settlement gains in Fiscal 1998
relate primarily to the freezing of the ADT pension plan. These cur-
tailment/settlement gains have been recorded in selling, general
and administrative expenses.