ADT 2009 Annual Report Download - page 199

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Acquisitions (Continued)
parties related to the SSC franchise for $6 million in connection with the transaction. The value
ascribed to the settlement of the legal matter was determined based on the consideration paid in excess
of the fair value of the franchise and franchise rights acquired.
These transactions were accounted for as business combinations. However, the Company and
Winner and SSC had a preexisting relationship. As a result, the Company was required to assess and
account for the business combination separately due to the preexisting relationship between the
Company and Winner and SSC. After assessing the specific facts and circumstances related to these
transactions, the Company recorded charges of $38 million and $20 million for Winner and SSC,
respectively, during 2008 for the reacquisition of franchise rights that were deemed to be unfavorable to
the Company when compared to pricing for current market transactions for similar arrangements. The
Company utilized an income method valuation approach in measuring the value of the preexisting
relationship. Since these charges related to a change in the manner in which the Company conducts
business in these territories, they were reflected as restructuring charges. The remaining purchase price
for Winner was $52 million, which consisted of a $46 million indefinite-lived intangible asset, $1 million
of customer lists which are amortizable over a 10-year period and $5 million of goodwill. The
remaining purchase price for SSC was $60 million, which consisted of a $52 million indefinite-lived
intangible asset, $4 million of customer lists which are amortizable over a 10-year period and $4 million
of goodwill. See Note 10. Goodwill associated with the Winner and SSC transactions was deductible for
tax purposes.
On June 30, 2008, the Company’s ADT Worldwide segment acquired FirstService, a division of
FirstService Corporation, for approximately $187 million. FirstService is a commercial security systems
integrator and provides a full range of integrated security system services, including design, engineering,
installation, servicing and monitoring of access control, closed-circuit television and intrusion systems.
The purchase price allocation for FirstService resulted in $38 million of net working capital and other
assets, $5 million of property, plant and equipment, net, $52 million of intangible assets and $92 million
of goodwill. Goodwill associated with the FirstService transaction was not deductible for tax purposes.
During 2008, cash paid for other acquisitions primarily within the Company’s ADT Worldwide and
Safety Products segments, totaled $38 million.
During 2007, cash paid for acquisitions totaled $31 million, primarily within the Company’s ADT
Worldwide, Safety Products and Flow Control segments.
These acquisitions were funded utilizing cash from operations. The results of operations of the
acquired companies have been included in Tyco’s consolidated results from the respective acquisition
dates. These acquisitions did not have a material effect on the Company’s financial position, results of
operations or cash flows.
ADT Dealer Program
During 2009, 2008 and 2007, Tyco paid $543 million, $376 million and $409 million of cash,
respectively, to acquire approximately 512,000, 370,000 and 415,000 customer contracts for electronic
security services through the ADT dealer program.
2009 Financials 107