ADT 2003 Annual Report Download - page 92

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Workforce reductions primarily relate to the elimination of
manufacturing personnel in the United States. Facilities closures
primarily relate to the shutdown of manufacturing and distri-
bution facilities in the United States. The other charges consist
primarily of charges relating to acquisition-related product
replacement.
In fiscal 2001, the Plastics and Adhesives segment recorded
restructuring and other charges of $8.3 million, of which $4.0
million is included in cost of sales (excluding impairments of
long-lived assets, which are discussed in Note 6). The remaining
$4.3 million consists of $2.6 million for the cost of announced
workforce reductions for the elimination of 322 positions
primarily in the United States consisting primarily of manu-
facturing and sales personnel; the cost of facility closures of
$0.2 million for the shutdown of 3 manufacturing and admin-
istrative facilities in the United States; and other charges of $1.5
million primarily for lease buyouts and distributor termination
fees. At September 30, 2002, all employees had been terminated
and all facilities had been shut down. In addition, these restruc-
turing accruals were fully utilized by September 30, 2002.
In addition to segment charges, the Company recorded a
charge of $3.4 million related to severance, all of which has
been utilized by September 30, 2003.
6.
Charges for the Impairment of Long-Lived Assets
The Company evaluates the recoverability of long-lived assets
relying on a number of factors including operating results,
business plans, economic projections and anticipated future
cash flows. An impairment in the carrying value of an asset is
recognized whenever anticipated future cash flows (undis-
counted) from an asset are estimated to be less than its carrying
value. When indicators of impairment are present, the carrying
values of the assets are evaluated in relation to the operating
performance and future undiscounted cash flows of the underly-
ing business. The net book value of an asset is adjusted to fair
value if its expected future undiscounted cash flows is less than
book value. Fair values are based on assumptions concerning the
amount and timing of estimated future cash flows and assumed
discount rates, reflecting varying degrees of perceived risk.
2003 CHARGES
During fiscal 2003, the Company recorded total charges for the
impairment of long-lived assets of $824.9 million.
The Fire and Security segment recorded charges for the
impairment of intangible assets of $100.7 million resulting
from a further deterioration of future estimated cash flows
anticipated from customers primarily in Mexico and certain
Latin American countries following the curtailment, and in
some instances, the termination of the ADT dealer program in
these countries. In addition, $11.2 million of impairment
charges were recorded related to the discontinuance of two
brand names. The Fire and Security segment also recorded
charges for the impairment of property, plant and equipment
of $20.9 million related primarily to subscriber systems and
other fixed assets, and $10.2 million associated with the termi-
nation of a software development project.
The Electronics segment recorded charges of $665.1 mil-
lion, of which $664.3 million relates to the impairment of the
TGN. This impairment was recorded to write off the entire
TGN as a result of our intention to divest this business. The
amount of the impairment was based upon estimates of its fair
value, less costs to dispose.
The Company recorded charges for the impairment of
property, plant and equipment of $14.6 million at Corporate,
primarily related to the closure and relocation of corporate
offices from New York to New Jersey and other impairment
charges of $2.2 million within the Engineered Products and
Services segment.
2002 CHARGES
During fiscal 2002, the Company recorded total charges for the
impairment of long-lived assets in continuing operations of
$3,309.5 million.
The Fire and Security segment recorded a charge of $5.6 mil-
lion related to the impairment of intangible assets resulting
from the curtailment, and in certain markets, the termination
of the ADT dealer program. In addition, the Fire and Security
segment recorded a charge of $109.1 million primarily related
to the impairment of property, plant and equipment associated
with the termination of a software development project. The
software development project related to a strategy to develop a
new comprehensive integrated customer database and associated
applications for this segment and its acquired companies. During
fiscal 2002, management, with the assistance of a third-party
consultant, performed a full evaluation to determine the infor-
mation technology needs of the Fire and Security business
relative to where it stood then and expectations for it over the
TYCO INTERNATIONAL LTD.
Notes to Consolidated Financial Statements