ADT 2006 Annual Report Download - page 133

We utilize established risk management policies and procedures in executing derivative financial
instrument transactions. We do not execute transactions or hold derivative financial instruments for
trading or speculative purposes. Derivative financial instruments related to interest rate sensitivity of
debt obligations, intercompany cross-border transactions and anticipated non-functional currency cash
flows, are used with the goal of mitigating a significant portion of these exposures when it is cost
effective to do so. Counterparties to derivative financial instruments are limited to financial institutions
with at least an A/A2 long-term debt rating.
Interest Rate Sensitivity
The table below provides information about our financial instruments that are sensitive to changes
in interest rates, including debt obligations and interest rate swaps. For debt obligations, the table
presents cash flows of principal repayment and weighted-average interest rates. For interest rate and
cross-currency swaps, the table presents notional amounts at the current market price rate and
weighted average interest rates. Notional amounts are used to calculate the contractual payments to be
exchanged under the contract. The amounts included in the table below are in U.S. Dollars ($ in
millions):
Fair
2007 2008 2009 2010 2011 Thereafter Total Value
Total debt:
Fixed rate (US$) ............... 3 110 1,591 5 1,002 3,911 6,622 7,231
Average interest rate .......... 1.3% 6.9% 6.2% 14.8% 6.8% 5.7% — —
Fixed rate (Euro) ............... 771 3 872 2 2 6 1,656 1,676
Average interest rate .......... 6.1% 6.3% 5.5% 8.2% 7.4% 7.2% — —
Fixed rate (Yen) ............... 3 1 1 — — 51 56 56
Average interest rate .......... 1.9% 1.9% 1.9% — — 5.0% — —
Fixed rate (British Pound) ........11—— — 924 9261,009
Average interest rate .......... 7.3% 6.9% — — — 6.5% — —
Fixed rate (Other) .............. 2 2 2 2 1 4 13 13
Average interest rate .......... 6.9% 6.9% 6.6% 6.5% 6.5% 6.9% — —
Variable rate (US$) ............. 9 711 94 10 1 2 827 827
Average interest rate(1) ......... 13.3% 5.9% 7.8% 13.0% 8.4% 9.1% — —
Variable rate (Euro) ............. 13 14 13 1 1 1 43 43
Average interest rate(1) ......... 4.4% 4.4% 4.4% 4.6% 4.6% 4.7% — —
Variable rate (Other) 6 5 4 3 2 10 30 30
Average interest rate(1) ......... 7.0% 7.7% 8.2% 8.7% 10.0% 10.3% — —
Cross Currency Swap:
British Pound to US$ ............ — — — — — 216 216 52
Average pay rate(1) .............. — — — — — 6.6% — —
Average receive rate ............ — — — — — 6.5% — —
Interest rate swaps:
Fixed to variable (US$) .......... — — — — — 375 375 (6)
Average pay rate(1) .............. — — — — — 7.0% — —
Average receive rate ............ — — — — — 6.4% — —
Fixed to variable (British Pound) . . . — — — — — 216 216 —
Average pay rate(1) .............. — — — — — 6.6% — —
Average receive rate ............ — — — — — 6.5% — —
(1) Weighted-average variable interest rates are based on applicable rates at September 29, 2006 per the terms of the contracts
of the related financial instruments.
2006 Financials 71