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TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. Discontinued Operations of Tyco Capital (CIT Group Inc.) (continued)
Operating results from the discontinued operations of Tyco Capital through July 8, 2002 were as
follows ($ in millions):
For the Period
June 2
For the Period (date of
October 1, acquisition)
2001 through through
July 8, 2002 September 30, 2001
Finance income ........................... $3,327.6 $1,676.5
Interest expense ........................... 1,091.5 597.1
Net finance income ........................ 2,236.1 1,079.4
Depreciation on operating lease equipment ....... 944.4 448.6
Net finance margin ........................ 1,291.7 630.8
Provision for credit losses .................... 665.6 116.1
Net finance margin, after provision for credit losses . 626.1 514.7
Other income ............................ 741.1 335.1
Operating margin .......................... 1,367.2 849.8
Selling, general, administrative and other costs and
expenses .............................. 687.8 398.7
Goodwill impairment ....................... 6,638.1 —
Operating expenses ........................ 7,325.9 398.7
(Loss) income before income taxes and minority
interest ............................... (5,958.7) 451.1
Income taxes ............................. (316.1) (195.0)
Minority interest .......................... (7.7) (3.6)
(Loss) income from discontinued operations ...... $(6,282.5) $ 252.5
During the quarter ended March 31, 2002, Tyco experienced disruptions to its business surrounding
its announced break-up plan, a downgrade in its credit ratings, and a significant decline in its market
capitalization. During this same time period, CIT also experienced credit downgrades and a disruption
to its historical funding base. Further, market-based information used in connection with the
Company’s preliminary consideration of the proposed IPO of CIT indicated that CIT’s book value
exceeded its estimated fair value as of March 31, 2002. As a result, the Company performed a
SFAS 142 first step impairment analysis as of March 31, 2002 and concluded that an impairment charge
was warranted at that time.
Management’s objective in performing the SFAS 142 first step analysis was to obtain relevant
market-based data to calculate the estimated fair value of CIT as of March 31, 2002 based on its
projected earnings and market factors expected to be used by market participants in ascribing value to
CIT in the planned separation of CIT from Tyco. Management obtained relevant market data from
financial advisors regarding the range of price to earnings multiples and market condition discounts
applicable to CIT as of March 31, 2002 and applied these market data to CIT’s projected annual
earnings as of March 31, 2002 to calculate an estimated fair value and any resulting goodwill
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