ADT 2006 Annual Report Download - page 114

(Gains) losses on divestitures
During 2004, the Company divested twenty-one and liquidated four non-core businesses across all
business segments primarily within Fire and Security. During 2004, the Company recorded net losses
and impairments on divestitures of $116 million in continuing operations in connection with the
divestiture or write-down to fair value of certain held for sale businesses.
During 2005, Tyco agreed to sell the TGN, its undersea fiber optic telecommunication network.
The sale was consummated on June 30, 2005. As part of the sale transaction, Tyco received gross cash
proceeds of $130 million, and the purchaser assumed certain liabilities. In connection with this sale,
Tyco recorded a $301 million gain which is reflected in (gains) losses on divestitures in the
Consolidated Statement of Income for 2005. The Company has presented the operations of the TGN in
continuing operations as the criteria for discontinued operations were not met.
During 2005, the Company divested 10 businesses that were reported as continuing operations in
Fire and Security, Healthcare and Engineered Products and Services. The Company recorded net losses
and impairments on divestitures of $32 million, including a $3 million charge reflected in cost of sales,
in connection with the divestiture and liquidation of these businesses, as well as the write-down to
estimated fair value of certain held for sale businesses.
During 2006, the Company divested 6 businesses that were reported as continuing operations in
Fire and Security and Healthcare. The Company recorded net gains on divestitures of $46 million in
connection with the divestiture of these businesses, less $2 million of divestiture charges related to the
write-down to estimated fair value and costs to sell certain other held for sale businesses.
For the divested businesses during 2006, 2005 and 2004, fair value used for the impairment
assessment was primarily based on the terms and conditions included or expected to be included in the
sales agreements.
Acquisitions
During 2006, Tyco’s Healthcare segment acquired over 90% ownership in Floreane Medical
Implants, S.A. (‘‘Floreane’’) for approximately $123 million in cash, net of cash acquired of $3 million.
Floreane is an innovator in the development of surgical support implants for parietal, urological and
gynecological surgery. The remaining outstanding shares would be acquired if they become available.
The Company recorded a $3 million in-process research and development charge in conjunction with
the acquisition.
During 2006, Tyco’s Healthcare segment also acquired over 50% ownership of Airox S.A. (‘‘Airox’’)
for approximately $59 million, net of cash acquired of $4 million. Airox is a leading European company
in the home respiratory ventilation systems business. Tyco expects to acquire the remaining Airox
shares in a mandatory tender offer. The initial share purchase and the subsequent tender offer
combined are expected to total approximately $108 million. The Company has also recorded an
$11 million in-process research and development charge in conjunction with the acquisition. The charge
relates to the development of second generation technology which has not yet obtained regulatory
approval. As of the acquisition date, the in-process research and development was not considered to be
technologically feasible or to have any alternative future use.
During 2006, Tyco’s Healthcare segment also acquired Confluent Surgical, Inc. (‘‘Confluent’’). The
total purchase price is expected to be $246 million. As of September 29, 2006, the Company has paid
approximately $200 million in cash, net of cash acquired of $12 million. The Company has also
deposited approximately $34 million of the total purchase price into an escrow account related to
closing balance sheet adjustments and certain indemnifications to be resolved through fiscal 2008. The
Company recorded a $49 million in-process research and development charge in conjunction with the
acquisition related to technology which Confluent is developing for numerous applications across
52 2006 Financials