ADT 2002 Annual Report Download - page 74

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Acquisitions and Divestitures (continued)
The following table summarizes the purchase accounting liabilities recorded in connection with the
fiscal 2000 purchase acquisitions ($ in millions):
Severance Facilities-Related
Number Distributor &
Number of of Supplier
Employees Amount Facilities Amount Cancellation Fees Other Total
Original liabilities established .......... 7,215 $273.9 102 $62.7 $32.3 $57.3 $426.2
Fiscal 2000 utilization ................ (4,023) (155.6) (53) (30.0) (21.3) (20.9) (227.8)
Ending balance at September 30, 2000 .... 3,192 118.3 49 32.7 11.0 36.4 198.4
Fiscal 2001 utilization ................ (4,962) (98.2) (65) (31.1) (10.8) (26.1) (166.2)
Additions to fiscal 2000 acquisition liabilities 3,842 35.6 86 36.5 6.5 25.4 104.0
Reclassifications ................... — 1.0 — (1.4) — 0.1 (0.3)
Reduction of estimates of fiscal 2000
acquisition liabilities ............... (515) (15.7) (9) (9.8) (1.4) (6.4) (33.3)
Ending balance at September 30, 2001 .... 1,557 41.0 61 26.9 5.3 29.4 102.6
Fiscal 2002 utilization ................ (997) (15.8) (32) (7.1) (0.4) (4.1) (27.4)
Reclassifications ................... — — — (0.3) 3.0 (6.0) (3.3)
Reduction of estimates of fiscal 2000
acquisition liabilities ............... (483) (16.3) (10) (15.9) (5.1) (12.5) (49.8)
Ending balance at September 30, 2002 .... 77 $ 8.9 19 $ 3.6 $ 2.8 $6.8 $22.1
Purchase accounting liabilities recorded during fiscal 2000 consist of $273.9 million for severance
and related costs, $62.7 million for costs associated with the shut down and consolidation of certain
acquired facilities, $32.3 million for distributor and supplier contractual cancellation fees and
$57.3 million for transaction and other direct costs. The $273.9 million of severance and related costs
covers employee termination benefits for approximately 7,215 employees located throughout the world,
consisting primarily of manufacturing and distribution employees to be terminated as a result of the
shut down and consolidation of production facilities and, to a lesser extent, administrative, technical
and sales and marketing personnel. As we continued to formulate the integration plans of fiscal 2000
acquisitions, we recorded additions to purchase accounting liabilities during fiscal 2001 of $35.6 million
for severence and related costs, reflecting the elimination of an additional 3,842 employees. At
September 30, 2002, all but 77 employees had been terminated and $8.9 million in severance and
related costs remained on the Consolidated Balance Sheet. The Company expects that the remaining
employee terminations will be completed in fiscal 2003.
The $62.7 million of exit costs are associated with the closure and consolidation of 102 facilities
located primarily in the Asia-Pacific region and the United States. These facilities include
manufacturing plants, sales offices, corporate administrative facilities and research and development
facilities. Included within these costs are accruals for non-cancelable leases associated with certain of
these facilities. During fiscal 2001, we recorded additional liabilities of $36.5 million for the closure of
an additional 86 facilities. All but 19 facilities had been closed or consolidated at September 30, 2002.
The remaining facilities are primarily small sales and administrative offices, which are expected to be
shut down in Fiscal 2003.
During fiscal 2002, the Company reduced its estimate of purchase accounting liabilities relating to
fiscal 2000 acquisitions by $49.8 million and, accordingly, goodwill and related deferred tax assets were
reduced by an equivalent amount. These reductions resulted primarily from costs being less than
originally anticipated.
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