ADT 2008 Annual Report Download - page 215

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Divestitures (Continued)
In January 2008, the Company sold a European manufacturer of public address products and
acoustic systems which was part of the Company’s Fire Protection Segment and recorded an $8 million
pre-tax loss on sale. The loss was recorded in income from discontinued operations, net of income
taxes in the Company’s Consolidated Statement of Operations.
During the first quarter of 2007, Aquas Industriales de Jose, C.A. (‘‘AIJ’’), a joint venture that was
majority owned by Infrastructure Services, was sold for $42 million in net cash proceeds and a pre-tax
gain of $19 million was recorded. The gain was recorded in discontinued operations, net of income
taxes in the Company’s Consolidated Statement of Operations. AIJ was part of the Company’s
Corporate and Other segment.
During the third quarter of 2007, Tyco completed the Separation and has presented its Healthcare
and Electronics businesses as discontinued operations in all periods presented.
In each period prior to the Separation, net interest and loss on early extinguishment of debt, which
is included in other expense, net in the Consolidated Statements of Operations, amounts were
proportionally allocated to Covidien and Tyco Electronics based on the debt amounts that Tyco believes
were utilized by Covidien and Tyco Electronics historically inclusive of amounts directly incurred.
Allocated net interest was calculated using our historical weighted-average interest rate on debt
including the impact of interest rate swap agreements. These allocated amounts were included in
discontinued operations. During 2007, allocated interest income, interest expense and other expense,
net was $35 million, $242 million and $388 million, respectively. During 2006, allocated interest income,
interest expense and other expense, net was $53 million, $378 million and $0 million, respectively.
During 2007, the Company incurred pre-tax separation costs related primarily to professional
services and employee-related costs of $154 million and $289 million, respectively, in discontinued
operations.
Additionally, the year ended September 28, 2007 includes tax charges related to the Separation
primarily for the write-off of deferred tax assets that are no longer realizable of $88 million in
discontinued operations.
The Company has used available information to develop its best estimates for certain assets and
liabilities related to the Separation. In limited instances, final determination of the balances will be
made in subsequent periods. During the year ended September 28, 2007, $72 million was recorded
through shareholders’ equity, primarily related to a cash true-up adjustment of $57 million and
$15 million of other items. During the year ended September 26, 2008, $70 million of other items was
recorded through shareholders’ equity. The other items, which aggregate $85 million, reflect immaterial
adjustments to shareholders’ equity which were recorded to correct the distribution amount at the date
of Separation. Adjustments in the future for the impact of filing final income tax returns in certain
jurisdictions where those returns include a combination of Tyco, Covidien and/or Tyco Electronics legal
entities and for certain amended income tax returns for the periods prior to the Separation may be
recorded to either shareholders’ equity or the statement of income depending on the specific item
giving rise to the adjustment.
112 2008 Financials