ADT 2008 Annual Report Download - page 214

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Divestitures (Continued)
sale was completed for $455 million net of a $20 million working capital adjustment resulting in net
cash proceeds of $435 million. The $435 million of net cash proceeds includes $53 million for the sale
of Earth Tech UK. A pre-tax gain of approximately $183 million was recorded in income from
discontinued operations, net of income taxes in the Company’s Consolidated Statements of Operations.
In order to complete the sale, the Company is required to obtain consents and approvals to transfer
the legal ownership of the Earth Tech UK businesses to AECOM. Therefore, in July 2008 the
Company and AECOM entered into an agreement in which AECOM would manage the UK businesses
on behalf of the Company, while the Company would finance the UK businesses’ operations. Also as
part of the agreement, AECOM agreed to reimburse the Company for all of the funding provided by
the Company through the closing date of the sale. As a result of the agreement, AECOM assumed all
the risks and rewards of ownership for the UK businesses. At September 26, 2008, the necessary
consents and approvals had not been obtained by the Company to transfer the legal ownership of the
Earth Tech UK businesses to AECOM. The Company expects to record a gain related to the UK
businesses upon receipt of the necessary consents and approvals, which is expected to occur in the first
half of 2009. Certain assets in China were excluded from the sale and are expected to be transferred
during the first half of 2009 for additional consideration of approximately $55 million once the
necessary consents and approvals are obtained. Infrastructure Services, ET Brasil, the EarthTech UK
business and the China assets discussed above were part of the Company’s Corporate and Other
segment.
As ET Brasil was excluded from the sale to AECOM, as discussed above, the Company recorded a
pre-tax impairment charge of approximately $16 million to write down ET Brasil to its fair value, less
cost to sell during 2008. Fair value used for the impairment assessment was based on existing market
conditions. In July 2008, the Company executed a definitive agreement to sell ET Brasil for
approximately $16 million in net cash proceeds. The sale is expected to close in the first quarter of
2009 upon receipt of the necessary consents and approvals.
At September 26, 2008, the Company has assessed and determined that the carrying value of the
remaining assets in China and ET Brasil are recoverable based on current fair value, less cost to sell.
The Company will continue to assess recoverability until the assets in China and ET Brasil are sold.
During 2008, the Company settled a contract dispute arising under its former Infrastructure
Services business. In connection with the settlement, the Company assessed its assets under the original
contract and concluded the assets were no longer recoverable, resulting in a $51 million charge to
discontinued operations.
In April 2008, the Company sold Ancon, a manufacturer of stainless steel products used in
masonry construction. Ancon was part of the Company’s Corporate and Other segment. The sale was
completed for $164 million in net cash proceeds and a pre-tax gain of $100 million was recorded which
was largely exempt from tax. The gain was recorded in income from discontinued operations, net of
income taxes in the Company’s Consolidated Statement of Operations. During the fourth quarter of
2008, the Company received an additional $6 million of proceeds related to the sale of Ancon.
In February 2008, the Company sold NDC, a company in the Japanese fire protection industry.
NDC was part of the Company’s Fire Protection and Safety Products Segments. The sale was
completed for $50 million in net cash proceeds and a pre-tax gain of $7 million was recorded. The gain
was recorded in income from discontinued operations, net of income taxes in the Company’s
Consolidated Statement of Operations.
2008 Financials 111