ADT 2008 Annual Report Download - page 203

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation—The Consolidated Financial Statements include the consolidated accounts of
Tyco International Ltd., a company organized under the laws of Bermuda, and its subsidiaries (Tyco
and all its subsidiaries, hereinafter collectively referred to as the ‘‘Company’’ or ‘‘Tyco’’) and have been
prepared in United States dollars and in accordance with generally accepted accounting principles in
the United States (‘‘GAAP’’). Unless otherwise indicated, references in the Consolidated Financial
Statements to 2008, 2007 and 2006 are to Tyco’s fiscal year ended September 26, 2008, September 28,
2007 and September 29, 2006, respectively.
Effective June 29, 2007, Tyco completed the spin-offs of Covidien and Tyco Electronics, formerly
the Healthcare and Electronics businesses, respectively, into separate, publicly traded companies (the
‘‘Separation’’) in the form of a distribution to Tyco shareholders. The distribution was made on
June 29, 2007, to Tyco shareholders of record on June 18, 2007, the record date. Each Tyco shareholder
received 0.25 of a common share of each of Covidien and Tyco Electronics for each Tyco common
share held on the record date. Tyco shareholders received cash in lieu of fractional shares for amounts
of less than one Covidien or Tyco Electronics common share. The distribution was structured to be
tax-free to Tyco shareholders except to the extent of cash received in lieu of fractional shares. While we
are a party to a Separation and Distribution, Tax Sharing and certain other agreements, we have
determined that there is no significant continuing involvement between the Company and Covidien or
Tyco Electronics under the relevant guidance in Statement of Financial Accounting Standards (‘‘SFAS’’)
No. 144, ‘‘Accounting for the Impairment or Disposal of Long-Lived Assets,’’ and Emerging Issues Task
Force (‘‘EITF’’) Issue No. 03-13, ‘‘Applying the Conditions of Paragraph 42 of SFAS No. 144 in
Determining Whether to Report Discontinued Operations.’’ Therefore, we have classified Covidien and
Tyco Electronics as discontinued operations for all periods prior to the Separation.
Additionally, on the distribution date, the Company, as approved by its Board of Directors, effected
a reverse stock split of Tyco’s common shares, at a split ratio of one for four. Shareholder approval for
the reverse stock split was obtained at the March 8, 2007 Special General Meeting of Shareholders.
Share and per share data for all periods presented have been adjusted to reflect the reverse stock split.
During 2008, 2007 and 2006, the Company incurred pre-tax costs related to the Separation of
$275 million, $1,083 million and $169 million, respectively. The costs include loss on early
extinguishment of debt, debt refinancing, tax restructuring, professional services and employee-related
costs. Of these amounts, $4 million, $105 million and $49 million is included in separation costs for
2008, 2007 and 2006, respectively. Additionally, $258 million and $259 million in 2008 and 2007,
respectively, is related to loss on early extinguishment of debt and is included in other expense, net.
Separation costs included in interest expense, net during 2008 were $47 million related to the write-off
of unamortized credit facility fees. Also during 2008, $34 million of income relating to the Tax Sharing
Agreement is included in other expense, net. During 2007 and 2006, $719 million and $120 million is
included in discontinued operations, respectively. Additionally, 2007 includes tax charges related to the
Separation primarily for the write-off of deferred tax assets that will no longer be realizable of
$183 million, of which $95 million is included in income taxes and $88 million is included in
discontinued operations.
During 2008, as part of the Company’s portfolio refinement efforts, the Company sold its Empresa
de Transmissao do Oeste Ltda. (‘‘ETEO’’) business, Ancon Building Products (‘‘Ancon’’) business,
Nippon Dry-Chemical (‘‘NDC’’) business, and a European Manufacturer of public address products
and acoustic systems. Additionally, the Company substantially completed the sale of its Infrastructure
Services Business, during the fourth quarter of 2008. The Company received approximately $1.0 billion
100 2008 Financials