ADT 2005 Annual Report Download - page 170

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Restructuring and Other Charges (Credits), Net (Continued)
2005 Charges and Credits
During 2005, the Company recorded restructuring charges of $53 million including $1 million
reflected in cost of sales for the non-cash write down in carrying value of inventory and $26 million,
$15 million and $11 million related to employee severance and benefits, facilities exit costs and other
costs, respectively. These charges related to several restructuring actions and facility exit plans which
were initiated in 2005 as well as incremental costs incurred in 2005 related to actions initiated during
2004. Of these charges, $25 million related to actions initiated and completed in 2005 while the
remaining $28 million related to actions which commenced prior to 2005. During 2005, the Company
completed restructuring activities announced in prior years for amounts less than originally estimated,
and accordingly reversed $22 million of restructuring reserves as a restructuring credit. In addition, the
Company also sold assets which were previously written down to their net realizable value in prior
years for amounts greater than originally estimated and recorded related gains as restructuring credits
of $20 million. The restructuring credits were mainly incurred by Electronics.
The $25 million of charges for 2005 restructuring initiatives were largely a result of actions taken
by Electronics and Fire and Security segments which incurred severance of $11 million and $6 million,
respectively. During 2005, the Company paid $17 million related to these actions and has $8 million
accrued as of September 30, 2005. In addition, the Company transferred $4 million of severance
liabilities from liabilities held for sale which resulted from the sale of TGN.
2004 Charges and Credits
Activity in the Company’s 2004 restructuring reserves is summarized as follows ($ in millions):
Employee Facilities
Severance Exit Non-cash
and Benefits Costs Other Charges Total
Charges ............................. $197 $60 $22 $ 6 $285
Utilization ........................... (88) (15) (19) (6) (128)
Credits ............................. (8) — — — (8)
Currency translation .................... 1 1 — — 2
Balance at September 30, 2004 ............ 102 46 3 — 151
Charges ............................. 6 7 6 — 19
Utilization ........................... (78) (21) (7) — (106)
Credits ............................. (13) — — — (13)
Currency translation .................... 1 — — — 1
Balance at September 30, 2005 ............ $ 18 $32 $ 2 $— $ 52
During 2004, the Company approved and announced to employees various plans to exit 181
facilities primarily in the United States. These plans included the termination of approximately 8,670
employees resulting in restructuring charges totaling $285 million, including $6 million reflected in cost
of sales for the non-cash write-down in carrying value of inventory, $197 million for employee
severance and benefits, $60 million for facility exit costs and $22 million for other related cost. Through
September 30, 2005, a total of $166 million, $36 million and $26 million related to employee severance
and benefits, facilities exit costs and other, respectively, had been expended related to these plans.
During 2005, the Company completed certain activities related to these plans for amounts less than
94 2005 Financials