ADT 2009 Annual Report Download - page 138

ultimate resolution could differ from the estimate and could have a material adverse effect on the
Company’s financial position, results of operations or cash flows.
Interest Income and Expense
Interest income was $44 million in 2009, as compared to $110 million and $104 million in 2008 and
2007, respectively. The decrease in interest income in 2009, and the increase in interest income in 2008,
is primarily related to $47 million of interest earned on funds held in escrow prior to settlement of the
class action during 2008 and lower investment yields during 2009.
Interest expense was $301 million in 2009, as compared to $396 million in 2008 and $313 million in
2007. The decrease in interest expense in 2009 primarily relates to interest on the class action
settlement liability of $47 million and cost related to our bridge loan of $48 million in 2008. The
increase in interest expense in 2008 was a result of $47 million of interest on funds held in escrow
related to the class action settlement liability, and increased costs related to our bridge loan and
revolving credit facilities.
The weighted-average interest rate on total debt outstanding as of September 25, 2009,
September 26, 2008 and September 28, 2007 was 6.6%, 6.2% and 6.3%, respectively.
In 2007, 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 during 2007. The portion of Tyco’s interest expense allocated to Covidien
and Tyco Electronics was $242 million during 2007.
Other Expense, Net
Other expense, net was $7 million in 2009 compared to $224 million in 2008 and $255 million in
2007. Other expense, net in 2009 primarily relates to a $14 million charge recorded as a result of a
decrease in the receivables due from Covidien and Tyco Electronics under the Tax Sharing Agreement,
which was partially offset by income of $5 million relating to a gain on derivative contracts used to
economically hedge the foreign currency risk related to the Swiss franc denominated dividends.
Other expense, net during 2008, includes $258 million on extinguishment of debt related to the
consent solicitation and exchange offers and termination of the bridge loan facility offset by income of
$6 million recorded in connection with the settlement of its 3.125% convertible senior debentures and
related financial instruments. See Notes 12 and 14 to the Consolidated Financial Statements. We also
recorded other-than-temporary impairments and realized losses on the sale of investments of $6 million
related primarily to investments in corporate debt. See Note 9 to the Consolidated Financial
Statements. Additionally, we recorded $40 million of income as a result of an increase in the
receivables due from Covidien and Tyco Electronics under the Tax Sharing Agreement in connection
with the adoption of the guidance pertaining to the accounting for uncertain income taxes. We also
recorded $6 million of expense for other activity in accordance with the Tax Sharing Agreement during
2008.
During 2007, other expense, net consisted primarily of a $259 million loss on early extinguishment
of debt incurred in connection with debt tender offers undertaken in connection with the Separation,
for which no tax benefit is available. This charge consists primarily of premiums paid and the write-off
of unamortized debt issuance costs and discounts. The total loss on early extinguishment of debt was
46 2009 Financials