ADT 2003 Annual Report Download - page 80

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$18.1 million due to current year acquisitions. Adjustments for
Sensormatic primarily relate to fair value adjustments as well as
the finalization of deferred tax adjustments related to previously
recorded purchase accounting liabilities. Adjustments for LPS
and Mallinckrodt primarily relate to reductions in purchase
accounting liabilities due to actual costs being less than originally
estimated. See roll forwards of purchase accounting accruals
below. Adjustments for DAAG relate to fair value adjustments.
The increase in intangible assets is due to adjustments associated
with prior years’ acquisitions.
The following table shows the fair values of assets and liabili-
ties recorded for purchase acquisitions completed in fiscal
2003, adjusted to reflect changes in the fair values of assets and
liabilities and purchase accounting liabilities and holdback/
earn-out liabilities recorded for purchase acquisitions completed
prior to fiscal 2003 ($ in millions):
Accounts receivable $«««41.3
Inventories 36.1
Prepaid expenses and other current assets (0.3)
Deferred income taxes (90.6)
Property, plant and equipment, net 67.8
Goodwill (462.4)
Intangible assets 40.7
Other assets 11.8
(355.6)
Accounts payable 1.7
Accrued expenses and other current liabilities (346.8)
Holdback/earn-out liabilities 13.0
Deferred income taxes (66.2)
Other long-term liabilities (1.3)
(399.6)
Cash consideration paid
(net of $1.1 million of cash acquired) $«««44.0
Purchase accounting liabilities recorded during fiscal 2003 in con-
nection with fiscal 2003 purchase acquisitions were immaterial.
At September 30, 2003, holdback/earn-out liabilities of
$211.7 million remained on the Consolidated Balance Sheet, of
which $93.1 million are included in accrued expenses and other
current liabilities and $118.6 million are included in other
long-term liabilities. In addition, a total of $199.0 million of
purchase accounting liabilities related mostly to fiscal 2001 and
2002 acquisitions remained on the Consolidated Balance Sheet,
of which $79.7 million are included in accrued expenses and
other current liabilities and $119.3 million are included in other
long-term liabilities. At September 30, 2003, the Company had
a contingent liability of $80 million related to the fiscal 2001
acquisition of Com-Net by the Electronics segment. The $80 mil-
lion is the maximum amount payable to the former shareholders
of Com-Net only after the construction and installation of a
communications system for the State of Florida is finished and
the State has approved the system based on the guidelines set
forth in the contract. The $80 million is not accrued at
September 30, 2003, as the outcome of this contingency cannot
be reasonably determined.
The pro forma effects of fiscal 2003 acquisitions and divesti-
tures on the Company’s results of operations are not material.
FISCAL 2002
During fiscal 2002, the Company purchased approximately 130
businesses for an aggregate cost of $3,750.5 million, consisting of
$1,683.8 million in cash, net of $158.0 million of cash acquired,
the issuance of approximately 47.8 million common shares val-
ued at $1,918.8 million, plus the fair value of stock options and
pre-existing put option rights assumed of $147.9 million
($102.6 million of the put option rights have been paid in cash).
Fiscal 2002 acquisitions include, among others, SBC/Smith Alarm
Systems, Century Tube Corporation, Sensormatic, Transpower
Technologies, DSC Group (“DSC”), Water & Power Technology,
LINQ Industrial Fabrics, Inc., Paragon Trade Brands, Inc.
(“Paragon”), Communications Instruments, Inc., Clean Air Sys-
tems and the purchase of the remaining minority public interest
of TyCom. In addition, during fiscal 2002 Tyco paid $1,139.3
million for approximately 1.4 million customer contracts for
electronic security services through the ADT dealer program.
In connection with these acquisitions, the Company recorded
purchase accounting liabilities of $194.6 million for the costs
of integrating the acquired companies and transaction costs.
Details regarding these purchase accounting liabilities are set
forth below. Tyco also issued approximately 17.7 million com-
mon shares valued at $819.9 million in connection with its
amalgamation with TyCom (see Note 9). Fair value of debt of
acquired companies aggregated $799.1 million. During fiscal
2002, the Company paid $474.8 million of cash for purchase
accounting liabilities related to current and prior years’ acqui-
sitions. In addition, the Company paid cash of $149.3 million
relating to holdback and earn-out liabilities primarily related
to certain prior year acquisitions. The Company also issued
44,139 common shares valued at $2.3 million relating to earn-
out liabilities during fiscal 2002. The value of these earn-out
common shares is based upon the fair value of the stock at the
time of issuance. The cash portions of the acquisition costs
were funded utilizing net proceeds from the issuance of long-
term debt. The results of operations of the acquired companies
have been included in Tyco’s consolidated results from their
respective acquisition dates.
TYCO INTERNATIONAL LTD.
Notes to Consolidated Financial Statements