ADT 2008 Annual Report Download - page 243

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Financial Instruments (Continued)
were marked to market with changes in the derivatives’ fair value recognized in the income statement
for the period ended September 28, 2007.
Previously, the Company hedged its net investment in certain foreign operations. Changes in the
fair value of forward contracts qualifying as net investment hedges were reported in the cumulative
translation adjustment component of accumulated other comprehensive income to the extent the
hedges are effective. The cumulative translation adjustment component of other comprehensive income
included a net loss of $299 million and $91 million during 2007 and 2006, respectively, for hedges of
the foreign currency exposure of the Company’s net investment in certain foreign operations. In
connection with the Separation and the debt tender, the Company de-designated its 6.125% Euro
denominated public notes due 2007 on March 29, 2007, its 5.5% Euro denominated public notes due
2008 and its 6.5% British Pound denominated public notes due 2031 on May 21, 2007, that had
previously been considered as hedges of net investments in certain foreign operations. At
September 26, 2008 and September 28, 2007, the Company did not hedge its net investments in foreign
operations, we had no net investment hedges and all of its outstanding borrowings were denominated
in U.S. dollars.
During 2008, the Company designated certain intercompany loans as permanent in nature, in the
amount of $2.1 billion as of September 26, 2008. As a result, the Company recorded $141 million of
cumulative translation adjustment through accumulated other comprehensive income as of
September 26, 2008 related to these loans.
Convertible Debentures
Given the requirement to convert the Company’s 3.125% convertible senior debentures into shares
of Tyco, Covidien and Tyco Electronics, the Company had previously recognized an asset for the fair
value of the Covidien and Tyco Electronics shares and a liability for the related conversion option.
During the fourth quarter of fiscal year 2008, the Company issued 217,589 shares of Tyco common
stock and obtained shares of Covidien and Tyco Electronics in connection with the redemption of the
Company’s 3.125% convertible senior debentures. The Company recorded income of $6 million to
other expense, net related to the settlement of the previously recognized asset and liability. See
Note 13. At September 26, 2008, no amounts remained outstanding under the 3.125% convertible
senior debentures.
16. Commitments and Contingencies
The Company has facility, vehicle and equipment leases that expire at various dates through the
year 2027. Rental expense under these leases was $415 million, $406 million and $386 million for 2008,
2007 and 2006, respectively. The Company also has facility and equipment commitments under capital
leases.
140 2008 Financials