ADT 2002 Annual Report Download - page 158

Corporate Items
Foreign Currency
The effect of changes in foreign exchange rates for fiscal 2002 compared to fiscal 2001 was an
increase in revenues of approximately $0.9 million and a decrease in operating income of approximately
$48.2 million. The effect of changes in foreign exchange rates for fiscal 2001 compared to fiscal 2000
was a decrease in revenues of approximately $1,053.6 million and a decrease in operating income of
approximately $199.5 million.
Corporate Expenses
Corporate expenses were $419.7 million in fiscal 2002. This amount includes net restructuring and
other and impairment charges of $199.1 million primarily related to the write-off of investment banking
fees and other deal costs associated with the terminated breakup plan and certain acquisitions that
were not completed, costs incurred to date for the internal investigation, and severance associated with
certain corporate employees. Corporate expenses were $243.9 million in fiscal 2001, as compared to
$494.4 million in fiscal 2000. Corporate expenses were level in fiscal 2002 as compared to fiscal 2001,
excluding net impairment charges, due to an overall decrease in compensation expense and lower than
expected advertising costs and expenses for charitable giving; offset by increased insurance costs, legal
and accounting fees, and other costs associated with the business disruptions that began during the
second quarter of fiscal 2002. The increase from fiscal 2000, excluding net impairment charges of
$276.2 million in fiscal 2000, was due principally to higher compensation expense under our equity-
based incentive compensation plans and an increase in corporate staffing and related costs to support
and monitor our expanding businesses and operations. The total costs incurred for the internal
investigation were $9.1 million in fiscal 2002. An additional expense of approximately $40 million is
estimated to conclude this process in 2003.
Amortization of Goodwill
Amortization of goodwill was $543.0 million and $344.4 million in fiscal 2001 and 2000,
respectively. In accordance with recently adopted accounting rule changes, goodwill is no longer
amortized beginning with our fiscal 2002 year. See Goodwill and Other Intangibles within Note 1 to our
Consolidated Financial Statements for a discussion of these accounting rule changes.
Other (Expense) Income
Fiscal 2002 includes other income from the early retirement of debt totaling $30.6 million, as
compared to losses from the early retirement of debt totaling $26.3 million and $0.3 million for fiscal
2001 and 2000, respectively.
During fiscal 2002, the Company recognized a $270.8 million loss on equity investments, primarily
related to its investments in FLAG Telecom Holdings Ltd. and other telecommunications companies
when it became evident that the declines in the fair value of FLAG and other investments were other
than temporary. During fiscal 2001, the Company recognized a $133.8 million loss on equity
investments, primarily related to its investment in 360Networks when it became evident that the
declines in the fair value of the investments were other than temporary.
During fiscal 2002, the Company sold certain of its businesses for net proceeds of approximately
$138.7 million in cash that consist primarily of certain businesses within the Healthcare and Fire and
Security Services segments. In connection with these dispositions, the Company recorded a net gain of
$23.6 million. In fiscal 2001, the Company sold its ADT Automotive business to Manheim
Auctions, Inc., a wholly-owned subsidiary of Cox Enterprises, Inc., for approximately $1.0 billion in
cash. The Company recorded a net gain on the sale of businesses of $410.4 million, principally related
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