ADT 2006 Annual Report Download - page 178

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Acquisitions (Continued)
ADT Dealer Program
During 2006, 2005 and 2004, Tyco paid $373 million, $328 million and $254 million of cash,
respectively, to acquire approximately 401,000, 364,000 and 302,000 customer contracts for electronic
security services through the ADT dealer program.
7. Other Expense, Net
During 2006, other expense, net consisted primarily of a loss relating to the write-down of certain
investments to their net realizable value.
During 2005, other expense, net included a loss on the retirement of debt. The Company
repurchased $1,241 million principal amount of its outstanding 2.75% convertible senior debentures for
$1,823 million and $750 million principal amount of its outstanding 3.125% convertible senior
debentures for $1,147 million. These repurchases resulted in a $1,013 million loss on the retirement of
debt, including the write-off of unamortized debt issuance costs.
Also during 2005, other expense, net included income of $109 million related to a court-ordered
restitution award. 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. Swartz, our former Chief Financial Officer and director (together, the ‘‘Defendants’’),
alleging enterprise corruption, fraud, conspiracy, grand larceny, falsifying certain business records and
other crimes. On June 17, 2005, a jury convicted the Defendants on 22 of 23 counts in the indictment.
On September 19, 2005, the Defendants were sentenced in New York State Supreme Court to serve
eight and one third years to twenty five years in prison and to make joint restitution to the Company in
the amount of $134 million, resulting from the larceny convictions.
The restitution award is comprised of $109 million of previously expensed compensation made to
the defendants and reported as other expense, net in prior years and $25 million related to a loan
receivable from one of the Defendants which had been and remains reflected in the Company’s
consolidated financial statements as a receivable. The Defendants have filed a notice of appeal of the
convictions. The Company considered the collectibility of the restitution award and assessed the
likelihood of the Defendants’ success upon appeal of the larceny convictions, which, if successful, could
result in a change to the restitution order, and has concluded that receipt of the restitution award is
probable. The Court ordered the restitution payment to be made by no later than one year from the
date of sentencing. Tyco has initiated the process of collecting the restitution payment owed, subject to
the pending appeal. See Note 28—Subsequent Events.
During 2004, other expense, net consisted primarily of a loss on the retirement of debt. The
Company repurchased $303 million of its 7.2% notes due 2008 for cash of $341 million, which resulted
in a $38 million loss, including the write-off of unamortized debt issuance costs. Additionally, the
Company repurchased $517 million of its outstanding 2.75% convertible senior debentures with a 2008
put option. The total purchase price paid was $750 million and the repurchase resulted in a
$241 million loss on the retirement of debt, including the write-off of unamortized debt issuance costs.
116 2006 Financials