ADT 2003 Annual Report Download - page 100

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The computation of diluted earnings per common share in
fiscal 2003 excludes the effect of the potential exercise of options
to purchase approximately 110.1 million shares because the
effect would be anti-dilutive. Diluted earnings per common
share for fiscal 2003 excludes 33.0 million shares related to the
Company’s zero coupon convertible debentures due 2020
because conversion conditions have not been met. Diluted
earnings per common share for fiscal 2003 also excludes 94.2
million shares and 49.3 million shares related to the Company’s
convertible senior debentures due 2018 and 2023, respectively,
because the effect would be anti-dilutive.
The computation of diluted loss per common share in fiscal
2002 excludes the effect of the potential exercise of options to
purchase approximately 10.0 million shares and the potential
exchange of convertible debt due 2010 for 2.9 million shares,
because the effect would be anti-dilutive. Diluted loss per com-
mon share for fiscal 2002 also excludes 47.5 million and 22.4
million shares related to the Company’s zero-coupon convertible
debentures due 2020 and 2021, respectively, because conversion
conditions have not been met.
The computation of diluted earnings per common share in
fiscal 2001 excludes the effect of the potential exercise of options
to purchase approximately 12.2 million shares because the effect
would be anti-dilutive. Diluted earnings per common share for
fiscal 2001 also excludes 48.0 million and 26.4 million shares
related to the Company’s zero coupon convertible debentures
due 2020 and 2021, respectively, because conversion conditions
have not been met.
14.
Sale of Accounts Receivable
Tyco has several programs under which it sells participating
interests in accounts receivable to investors who, in turn,
purchase and receive ownership and security interests in those
receivables. As collections reduce accounts receivable included in
the pool, the Company sells new receivables. The Company has
the risk of credit loss on the receivables and, accordingly, the full
amount of the allowance for doubtful accounts has been retained
on the Consolidated Balance Sheets. At September 30, 2003,
the availability under these programs is $1,025 million. At
September 30, 2003 and 2002, $803 million and $933 million,
respectively, was utilized under the programs. The proceeds from
the sales were used to repay short-term and long-term borrow-
ings and for working capital and other corporate purposes and
are reported as operating cash flows in the Consolidated
Statements of Cash Flows. The sale proceeds are less than the face
amount of accounts receivable sold by an amount that approxi-
mates the cost that would be incurred if commercial paper were
issued backed by these accounts receivable. The discount from
the face amount is accounted for as a loss on the sale of receivables
and has been included in selling, general and administrative
expenses in the Consolidated Statements of Operations. Such
discount aggregated $29.0 million, $17.0 million, and $25.3
million, or 3.5%, 2.7%, and 5.3% of the weighted-average bal-
ance of the receivables outstanding, during fiscal 2003, 2002
and 2001, respectively. The Company retains collection and
administrative responsibilities for the participating interests in
the defined pool. Also, some of our international businesses sell
accounts receivable as a short-term financing mechanism.
These transactions qualify as true sales. The aggregate amount
outstanding under these arrangements was $202 million and
$157 million at September 30, 2003 and 2002, respectively.
As a result of the rating agencies’ downgrade of Tyco’s debt
in June 2002, investors of one of our accounts receivable pro-
grams have the option to discontinue reinvestment in new
receivables and terminate the program. However, the investors
have not exercised this option. The amount outstanding under
this program was $103.2 million and $132.4 million at
September 30, 2003 and 2002, respectively.
15.
Available-for-Sale Investments
At September 30, 2003 and 2002, Tyco had available-for-sale
equity investments with a fair market value of $23.2 million
and $24.6 million and a cost basis of $25.5 million and $32.4
million, respectively. As of September 30, 2003, there were gross
unrealized losses of $5.7 million and the gross unrealized gains
of $3.5 million associated with these investments. As of
September 30, 2002, there were gross unrealized losses of $8.2
million and the gross unrealized gains of $0.4 million associ-
ated with these investments. These amounts have been
included as a separate component of shareholders’ equity. See
Note 8 for discussion of realized losses on equity investments.
16.
Assets Held for Sale
During the fourth quarter of fiscal 2003, the Company initiated
a divestiture program through which it plans to dispose of
some non-core businesses. As part of this divestiture program,
Tyco intends to sell the TGN. The Company plans to exit the
TYCO INTERNATIONAL LTD.
Notes to Consolidated Financial Statements