ADT 2005 Annual Report Download - page 178

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Acquisitions (Continued)
Acquisition Liabilities
At September 30, 2005 and 2004, acquisition liabilities were included in the Company’s
Consolidated Balance Sheets as follows ($ in millions):
2005 2004
Accrued and other current liabilities .......................... $24 $ 28
Other liabilities ......................................... 46 94
$70 $122
These acquisition liabilities were established in connection with acquisitions in 2002 and prior and
relate primarily to long-term non-cancelable lease obligations. The Company paid $29 million,
$53 million and $169 million to fund acquisition liabilities during 2005, 2004 and 2003, respectively.
Holdback/Earn-out Liabilities
The Company paid cash of approximately $18 million, $52 million and $98 million during 2005,
2004 and 2003, respectively, relating to holdback and earn-out liabilities related to certain prior period
acquisitions. Holdback liabilities represent a portion of the purchase price withheld from the seller
pending finalization of the acquisition balance sheet. Certain acquisitions have provisions that would
require Tyco to make additional ‘‘earn-out’’ payments to the sellers if the acquired company achieves
certain milestones subsequent to its acquisition by Tyco. These earn-out payments are tied to certain
performance measures, such as revenue, gross margin or earnings growth and are generally treated as
additional purchase price.
At September 30, 2005 and 2004, holdback/earn-out liabilities were included in the Company’s
Consolidated Balance Sheets as follows ($ in millions):
2005 2004
Accrued and other current liabilities ......................... $ 79 $ 59
Other liabilities ........................................ 69 108
$148 $167
ADT Dealer Program
During 2005, 2004 and 2003, Tyco paid $328 million, $254 million and $597 million of cash,
respectively, to acquire 0.4 million, 0.3 million and 0.6 million customer contracts for electronic security
services through the ADT dealer program.
6. Other Expense, Net
On September 12, 2002, indictments were filed in the Supreme Court of the State of New York
against Mr. L. Dennis Kozlowski, our former Chairman and Chief Executive Officer, and Mr. Mark H.
102 2005 Financials