ADT 2002 Annual Report Download - page 152

the technical and construction competencies of the business would be preserved for when industry
conditions improve.
The following table provides information about the fiscal 2002 restructuring and other charges
related to the Electronics segment:
Facilities- Inventory-
Severance Related Related Other Total
Fiscal 2002 charges ....................... $198.1 $250.2 $ 943.6 $ 138.9 $1,530.8
Fiscal 2002 reversals ....................... (2.5) (8.1) — — (10.6)
Fiscal 2002 utilization ...................... (79.6) (77.7) (164.7) (1.7) (323.7)
Balance at September 30, 2002 ............... $116.0 $164.4 $ 778.9 $ 137.2 $1,196.5
As a result of the charges recorded within the Electronics segment during fiscal 2002, we estimate
that our overall cost structure will be reduced due to the impact of these charges by approximately
$710 million (approximately $570 million cash and $140 million non-cash) on an annualized basis, of
which $550 million relates to cost of sales and $160 million to other selling, general and administrative
expenses. However, since business conditions do not remain constant the actual reductions in cost may
significantly differ from these amounts.
Net revenue increased 8.8% in fiscal 2001 over fiscal 2000, including a 6.9% increase in product
revenue and a $252.1 million increase in service revenue, due to acquisitions by our electronic
components group. These acquisitions included: Siemens Electromechanical Components GmbH & Co.
KG in November 1999; Praegitzer Industries, Inc. in December 1999; Critchley Group PLC in
March 2000; the electronic OEM business of Thomas & Betts in July 2000; CIGI in October 2000;
and LPS in December 2000. Excluding the $436.8 million decrease from foreign currency exchange
fluctuations, the impact of the acquisitions listed above and all other acquisitions with a purchase price
of $10 million or more, pro forma revenue (calculated in the manner described above in ‘‘Overview’’)
decreased an estimated 5.7%, which reflects an economic slowdown in the computer and consumer
electronics and communications industries.
The slight decrease in operating income was primarily the result of net restructuring and other
charges and impairments largely offset by increased operating income due to higher revenues in the
electronics components business associated with acquisitions in fiscal 2001, as well as the full year result
of acquisitions in 2000. In addition, there were margin improvements on 27.7% lower revenues in Tyco
Telecommunications business due to the completion of several large third-party system contracts in
fiscal 2001 with higher margins, offset by approximately $36.5 million of incremental expenses related
to bad debt provisions and legal costs due to industry conditions.
Operating income and margins in fiscal 2001 include restructuring and other charges of
$383.8 million primarily related to the closure of facilities within the communications, computer and
consumer electronics industries in response to the severe downturn experienced. Included within the
$383.8 million are inventory write-downs of $74.1 million and charges of $51.7 million for the write-up
of inventory under purchase accounting, both of which are included in cost of sales. Operating income
and margins after charges (credits) for fiscal 2001 also includes charges of $98.5 million for the
impairment of property, plant and equipment associated with the facility closures.
Operating income and margins in fiscal 2000 include a net merger, restructuring and other credit
of $77.8 million in fiscal 2000, of which a net credit of $5.4 million related to inventory is included in
cost of sales, primarily related to a revision of estimates of merger, restructuring and other accruals
related to the merger with AMP and AMP’s profit improvement plan.
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