ADT 2007 Annual Report Download - page 156

a Brazilian subsidiary of Infrastructure Services. The transaction is subject to Brazilian regulatory
approval and normal closing conditions and is expected to close by the end of the second quarter of
fiscal 2008. The Company expects to sell the remaining portion of Infrastructure Services by the end of
fiscal 2008.
The AIJ, Infrastructure Services, Plastics, Adhesives and Ludlow Coated Products and A&E
Products businesses met the held for sale and discontinued operations criteria and have been included
in discontinued operations in all periods presented.
Losses on divestitures
During 2007, 2006 and 2005, the Company recorded $4 million, $2 million and $23 million,
respectively, of divestiture charges in continuing operations in connection with the write-down to fair
value, less cost to sell, of certain businesses. The fair value used for the impairment assessments was
primarily based on the terms and conditions included or expected to be included in the sales
agreements.
Acquisitions
During 2007, cash paid for acquisitions included in continuing operations, primarily within ADT
Worldwide, Safety Products and Flow Control, totaled $31 million. Cash paid for acquisitions by
businesses included in continuing operations during 2006 and 2005 totaled $5 million and $6 million,
respectively.
These acquisitions were funded utilizing cash from operations. The results of operations of the
acquired companies have been included in Tyco’s consolidated results from the respective acquisition
dates. These acquisitions did not have a material effect on the Company’s financial position, results of
operations or cash flows.
Goodwill Impairment
In connection with the Separation, during the third quarter of 2007 Tyco reorganized into a new
management and segment reporting structure. As part of these organizational changes, the Company
assessed new reporting units and conducted valuations to determine the assignment of goodwill to the
new reporting units based on their estimated relative fair values. Following the relative fair value
goodwill allocation, the Company then tested goodwill for impairment by comparing the fair value of
each reporting unit with its carrying value amount. If the carrying amount of a reporting unit exceeded
its fair value, goodwill was considered potentially impaired. Where goodwill was potentially impaired,
the Company compared the implied fair value of the reporting unit goodwill to the carrying amount of
that goodwill. The carrying amount of goodwill exceeded the implied fair value of goodwill in the
Australia and New Zealand Security Services business, part of the ADT Worldwide segment. As a
result, the Company recognized a goodwill impairment of $46 million in the third quarter of 2007.
In determining fair value, management relies on a number of factors including operating results,
business plans, economic projections, anticipated future cash flows, and market place data. There are
inherent uncertainties related to these factors and judgments in applying them to the analysis of
goodwill impairment. Changes to these factors and judgments could result in impairment to one or
more of our reporting units in a future period. See Note 1.
64 2007 Financials