ADT 2008 Annual Report Download - page 153

Corporate and Other
Corporate expense for 2008 was $3.2 billion lower as compared to the prior year, primarily
resulting from various charges in 2007, including the class action settlement charge of $2.862 billion,
separation costs of $117 million and net restructuring and asset impairment charges of $40 million
primarily related to the consolidation of certain headquarter functions. Corporate expense for 2008
included net charges of $28 million composed of a $29 million charge for a legacy legal settlement,
$4 million of separation costs and $5 million for restructuring, asset impairment and divestiture charges,
net, offset by a credit of $10 million for class action settlement recoveries. The remaining decrease in
corporate expense is primarily related to cost reduction initiatives and the restructuring program.
Corporate expense for 2006 included $72 million of income related to the extinguishment of certain
payment obligations under a split dollar life insurance policy and rabbi trust pursuant to a settlement
with Mr. Kozlowski, former Chief Executive Officer, and $48 million of income resulting from a
reduction in our estimated workers’ compensation liabilities primarily due to favorable claims
experience. These income items were partially offset by incremental stock option charges of $47 million
required under SFAS No. 123R, Separation related costs of $49 million and restructuring and
divestiture charges of $2 million.
Interest Income and Expense
Interest income was $110 million in 2008, as compared to $104 million and $46 million in 2007 and
2006, respectively. The increases in interest income in 2008 and 2007 are primarily related to interest
earned on the class action settlement escrow of $47 and $41 million, respectively.
Interest expense was $396 million in 2008, as compared to $313 million in 2007 and $279 million in
2006. The increases in interest expense in 2008 and 2007 are a result of interest on the class action
settlement liability of $47 and $41 million, respectively, and increased costs related to our bridge loan
and revolving credit facilities.
The weighted-average interest rate on total debt outstanding at September 26, 2008, September 28,
2007 and September 29, 2006 were 6.2%, 6.3% and 6.0%, respectively.
In 2007 and 2006, net interest amounts were proportionally allocated to Covidien and Tyco
Electronics based on the debt amounts that we believe were utilized by Covidien and Tyco Electronics
historically inclusive of amounts directly incurred, and is included in discontinued operations. Allocated
net interest was calculated using our historical weighted average interest rate on debt, including the
impact of interest rate swap agreements. The portion of Tyco’s interest income allocated to Covidien
and Tyco Electronics was $35 million and $53 million during 2007 and 2006, respectively. The portion
of Tyco’s interest expense allocated to Covidien and Tyco Electronics was $242 million and $378 million
during 2007 and 2006, respectively.
50 2008 Financials