ADT 2003 Annual Report Download - page 49

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47
The net change in total working capital, net of the effects of
acquisitions and divestitures, was an increase of $307.0 million
in fiscal 2003, including cash paid out for restructuring and
other charges of $503.3 million. The components of this change
are set forth in detail in our Consolidated Statement of Cash
Flows. The significant changes in working capital included a
$627.6 million decrease in accounts payable due primarily to an
overall decrease across all of our business segments resulting
from improved inventory management, as well as a decrease
within Tyco Telecommunications due to lower purchasing
resulting from the completion of the TGN. In addition, accrued
expenses and other current liabilities decreased $559.9 million
primarily as a result of cash paid out associated with accruals
for restructuring and other charges. We focus on maximizing
the cash flow from our operating businesses and attempt to
keep the working capital employed in the businesses to the
minimum level required for efficient operations.
During fiscal 2003, we decreased our participation in our
sale of accounts receivable program by $119.0 million.
During fiscal 2003, fiscal 2002 and fiscal 2001, we paid out
$271.8 million, $624.1 million and $878.7 million, respectively,
in cash that was charged against accruals established in con-
nection with acquisitions. This amount is included in “Cash
paid for purchase accounting and holdback/earn-out liabilities”
under Cash Flows From Investing Activities in the Consoli-
dated Statements of Cash Flows.
Accruals for restructuring and other items are taken as a
charge against current earnings at the time the accruals are
established in accordance with SFAS No. 146, “Accounting for
Costs Associated with Exit or Disposal Activities.” Amounts
expended for restructuring and other costs are charged against
the accruals as they are paid out. If the amount of the accruals
proves to be greater than the costs actually incurred, any excess
is credited against restructuring and other charges in the
Consolidated Statement of Operations in the period in which
that determination is made.
At September 30, 2002, there existed accruals for restructur-
ing and other charges of $1,021.6 million on the Consolidated
Balance Sheet. During fiscal 2003, we recorded net restructuring
credits of $84.8 million, of which credits of $10.5 million are
included in cost of sales, related to a revision of estimates of
prior years’ restructuring charges. During fiscal 2003, we paid
out $503.3 million in cash and incurred $0.3 million in non-cash
uses that were charged against these liabilities. We also reclassi-
fied $197.5 million of restructuring accruals to the appropriate
balance sheet accounts, recorded $7.4 million in foreign currency
translation adjustments and recorded non-cash adjustments of
$40.0 million. At September 30, 2003, there remained $293.6 mil-
lion of accruals for restructuring and other charges on our
Consolidated Balance Sheet, of which $159.3 million is included
in accrued expenses and other current liabilities, and $134.3 mil-
lion is included in other long-term liabilities.
During fiscal 2003, we purchased customer contracts for
electronic security services for cash of $596.8 million and
businesses for cash of $44.0 million, net of $1.1 million of
cash acquired.
At the beginning of fiscal 2003, purchase accounting accru-
als were $539.0 million as a result of purchase accounting
transactions in prior years. In connection with fiscal 2003
acquisitions, we established purchase accounting liabilities of
$0.2 million for transaction and integration costs. In addition,
purchase accounting liabilities of $25.8 million and a corre-
sponding increase to goodwill and deferred tax assets were
recorded during fiscal 2003 relating to fiscal 2002 and prior
years’ acquisitions. These accruals related primarily to revisions
associated with finalizing the exit plans of Paragon and Eberle,
both acquired during fiscal 2002. Also, during fiscal 2003, we
reclassified $3.8 million of fair value adjustments related to the
write down of assets for fiscal 2002 acquisitions out of purchase
accounting accruals into the appropriate asset or liability account.
We also recorded $16.5 million in cumulative translation
adjustments. During fiscal 2003, we paid out $171.5 million in
TYCO INTERNATIONAL LTD.