ADT 2002 Annual Report Download - page 70

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Acquisitions and Divestitures (continued)
acquired, the issuance of approximately 78.2 million common shares valued at $3,904.6 million, plus the
fair value of stock options assumed of $115.9 million. Of this $6,117.3 million, Tyco paid $798.1 million
for approximately 1.0 million customer contracts for electronic security services through the ADT
dealer program. The Company purchased all of the voting equity interests in each of the businesses
acquired. In connection with these acquisitions, the Company recorded purchase accounting liabilities
of $1,021.3 million for the costs of integrating the acquired companies and transaction costs. Also
during fiscal 2001, Tyco purchased CIT for an aggregate cost of $9,455.5 million, consisting of
$2,486.4 million in cash, net of $2,156.4 million of cash acquired, and the issuance of approximately
133.0 million common shares valued at $6,650.5 million, plus the fair value of options assumed of
$318.6 million. CIT was subsequently disposed of in fiscal 2002 and has been presented as discontinued
operations.
During fiscal 2001, $773.0 million of cash was paid during the year for purchase accounting
liabilities related to current and prior years’ acquisitions. In addition, the Company paid approximately
$105.7 million relating to holdback and earn-out liabilities primarily related to certain prior year
acquisitions. Fiscal 2001 purchase acquisitions include, among others, Mallinckrodt Inc., CIGI
Investment Group, Inc., InnerDyne, Inc., LPS, Simplex Time Recorder Co., Scott, CIT and the
electronic security systems businesses of Cambridge Protection Industries, L.L.C. Certain acquisitions
have provisions to defer a portion of the purchase price to cover holdback liabilities for items such as
the finalization of the acquired company’s net assets, during a specified period of time or to pay the
purchase price over a period of time. At September 30, 2002, the Company has a contingent liability of
$80 million related to the fiscal 2001 acquisition of Com-Net by the Electronics segment. The
$80 million is the maximum payable to the former shareholders of Com-Net only after the construction
and installation of the communications system is finished and the State of Florida has approved the
system based on the guidelines set forth in the contract. The $80 million is not accrued at
September 30, 2002, as the outcome of this contingency cannot be reasonably determined. The cash
portions of the acquisition costs were funded utilizing net proceeds from the issuance of long-term debt
and Tyco common shares and net proceeds from the disposal of businesses. Fair value of debt of
acquired companies aggregated $40,643.2 million, including $39,050.9 million of debt of CIT. Each
acquisition was accounted for as a purchase, and the results of operations of the acquired companies
have been included in the Company’s consolidated results from their respective acquisition dates.
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