ADT 2005 Annual Report Download - page 186

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Goodwill and Intangible Assets (Continued)
Intangible assets, net were $5,085 million and $5,311 million at September 30, 2005 and 2004,
respectively. Accumulated amortization amounted to $3,700 million and $3,048 million at September 30,
2005 and 2004, respectively. The following table sets forth the gross carrying amount and accumulated
amortization of the Company’s intangible assets at September 30, 2005 and 2004 ($ in millions):
September 30, 2005 September 30, 2004
Gross Weighted Average Gross Weighted Average
Carrying Accumulated Amortization Carrying Accumulated Amortization
Amount Amortization Period(1) Amount Amortization Period(1)
Amortizable:
Contracts and related
customer relationships .... $4,974 $2,638 12 years $4,596 $2,152 12 years
Intellectual property ....... 2,921 992 20 years 2,874 829 20 years
Other .................. 211 70 27 years 217 67 26 years
Total .................... $8,106 $3,700 16 years $7,687 $3,048 17 years
Non-Amortizable:
Intellectual property ....... $ 652 $ 650
Other .................. 27 22
Total .................... $ 679 $ 672
(1) Intangible assets not subject to amortization are excluded from the calculation of the weighted average amortization period.
Intangible asset amortization expense for 2005, 2004 and 2003 was $653 million, $691 million and
$722 million, respectively. The estimated aggregate amortization expense on intangible assets currently
owned by the Company is expected to be approximately $600 million for 2006, $550 million for 2007,
$500 million for 2008, $450 million for 2009, and $350 million for 2010.
See Note 3 for information regarding the impairment of intangible assets.
13. Related Party Transactions
The Company has amounts due related to loans and advances issued to employees in prior years
under the Company’s Key Employee Loan Program, relocation programs and other advances made to
executives. Loans were provided to employees under the Company’s Key Employee Loan Program,
which is now discontinued except for outstanding loans, for the payment of taxes upon the vesting of
shares granted under our Restricted Share Ownership Plans. The loans are not collateralized and bear
interest, payable annually, at a rate based on the six-month LIBOR, calculated annually as the average
of the 12 rates in effect on the first day of the month. Loans are generally repayable in ten years,
except that earlier payments are required under certain circumstances, such as when an employee is
terminated. In addition, the Company made mortgage loans to certain employees under employee
relocation programs. These loans are generally payable in 15 years and are collateralized by the
underlying property. During 2005 and 2004, the maximum amount outstanding under these programs
was $70 million and $78 million, respectively. Loans receivable under these programs, as well as other
unsecured advances outstanding, were $68 million and $70 million at September 30, 2005 and 2004.
The total outstanding loans receivable includes loans to L. Dennis Kozlowski, the Company’s former
Chairman and Chief Executive Officer (until June 2002). The amount outstanding under these loans,
plus accrued interest, was $49 million at September 30, 2005 and 2004 and the rate of interest charged
110 2005 Financials