ADT 2005 Annual Report Download - page 175

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Charges for the Impairment of Long-Lived Assets (Continued)
The Company recorded charges for the impairment of property, plant and equipment of
$679 million at Corporate, of which $664 million related to the write-down of the TGN, which was
classified as held for sale, to its estimated fair value, less costs to dispose. The TGN was sold in 2005.
The remaining $15 million charge primarily related to the closure and relocation of corporate offices.
In addition, other impairment charges of $2 million and $1 million that were recorded at
Engineered Products and Services and Electronics, respectively.
4. Discontinued Operations and Divestitures
Discontinued Operations
In May 2005, Tyco announced its intent to explore the divesture of its Plastics and Adhesives
business segment, a global manufacturer of plastic film, specialty tapes and adhesives, coated products
and garment hangers. During 2005, as a result of consideration for potential sale and deteriorating
operating results in the A&E Products business, the Company performed an interim assessment of the
recoverability of both goodwill and long-lived assets in the Plastics and Adhesives segment. Estimated
fair values of the reporting units and long-lived assets in Plastics and Adhesives were developed based
on probability-weighted expected future cash flows of these assets. As a result of this assessment, the
Company determined that the book value of certain long-lived assets in the A&E Products reporting
unit of Plastics and Adhesives was greater than their estimated fair value and consequently recorded a
long-lived asset impairment of $40 million. The Company also determined that the book value of the
A&E Products reporting unit was in excess of its estimated fair value which resulted in a goodwill
impairment charge of $162 million. At September 30, 2005, the Plastics and Adhesives segment met the
held for sale criteria and its results of operations have been included in discontinued operations for all
periods presented. The Company is negotiating a sales agreement with potential buyers and expects to
complete a sale transaction in 2006. The Company has assessed the recoverability of the segment’s
carrying value at September 30, 2005 and will continue to assess recoverability based on current fair
values, less cost to sell, until the businesses are sold. Depending on the outcome of the sale
negotiations, the Company may incur additional impairment charges.
During 2005, the Company divested eight businesses which were reported as discontinued
operations within Fire and Security, Plastics and Adhesives and Engineered Products and Services. The
Company reported losses on sale or additional impairments to write the carrying value of such assets
down to their estimated fair value of $56 million during 2005. During 2004, the Company reported
losses on the sale of discontinued operations of $132 million, of which $36 million related to goodwill
impairments, to write the carrying value of such assets down to their fair value less cost to sell.
During 2003, Tyco recorded income from discontinued operations of $20 million for a restitution
payment made by Frank E. Walsh Jr., a former director.
2005 Financials 99