ADT 2002 Annual Report Download - page 100

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. (Loss) Earnings Per Common Share (continued)
The computation of diluted loss per common share in fiscal 2002 excludes the effect of the
potential exercise of options to purchase approximately 10.0 million shares and the potential exchange
of convertible debt due 2010 for 2.9 million shares, because the effect would be anti-dilutive. The
computation of diluted earnings per common share in fiscal 2001 and fiscal 2000 excludes the effect of
the assumed exercise of approximately 12.2 million and 7.3 million stock options, respectively, that were
outstanding as of September 30, 2001 and 2000, respectively, because the effect would be anti-dilutive.
Dilutive (loss) earnings per common share for fiscal 2002 also excludes 47.5 million and 22.4 million
shares respectively, related to the Company’s zero coupon convertible debentures due 2020 and 2021,
respectively, because conversion conditions have not been met. Dilutive earnings per common share for
fiscal 2001 also excludes 48.0 million and 26.4 million shares respectively, related to the Company’s
zero coupon convertible debentures due 2020 and 2021, respectively, because conversion conditions
have not been met.
14. Sale of Accounts Receivable
Tyco has several programs under which it sells participating interests in accounts receivable to
investors who, in turn, purchase and receive ownership and security interests in those receivables. As
collections reduce accounts receivable included in the pool, the Company sells new receivables. The
Company has the risk of credit loss on the receivables and, accordingly, the full amount of the
allowance for doubtful accounts has been retained on the Consolidated Balance Sheets. At
September 30, 2002, the availability under these programs is $1,025 million. At September 30, 2002 and
2001, $933 million and $695 million, respectively, was utilized under the programs. The proceeds from
the sales were used to repay short-term and long-term borrowings and for working capital and other
corporate purposes and are reported as operating cash flows in the Consolidated Statements of Cash
Flows. The proceeds of sale are less than the face amount of accounts receivable sold by an amount
that approximates the cost that would be incurred if commercial paper were issued backed by these
accounts receivable. The discount from the face amount is accounted for as a loss on the sale of
receivables and has been included in selling, general and administrative expenses in the Consolidated
Statements of Operations. Such discount aggregated $17.0 million, $25.3 million, and $25.7 million, or
2.7%, 5.3% and 6.6% of the weighted-average balance of the receivables outstanding, during fiscal
2002, 2001 and 2000, respectively. The Company retains collection and administrative responsibilities
for the participating interests in the defined pool. Also, some of our international businesses sell
accounts receivable as a short-term financing mechanism. These transactions qualify as true sales. The
aggregate amount outstanding under these arrangements was $157 million and $153 million at
September 30, 2002 and 2001, respectively.
As a result of the rating agencies’ downgrade of Tyco’s debt to below investment grade status in
June 2002, investors of two of our accounts receivable programs had the option to discontinue
reinvestment in new receivables and terminate the programs. The investors have not exercised this
option and one program was subsequently amended to continue reinvestment. The amount outstanding
under the other program was $132.4 million at September 30, 2002.
In addition, during fiscal 2002 Tyco sold certain receivables from time to time to Tyco Capital prior
to its disposition. The average amount sold during such period was $332.5 million, which is net of
discounts equal to $15.4 million. These sales were eliminated as an intercompany transaction in the
Consolidated Financial Statements.
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