ADT 2009 Annual Report Download - page 219

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Debt (Continued)
available cash. As of September 26, 2008, no amounts remain outstanding under the 3.125% convertible
senior debentures.
Other Debt Information
The aggregate amounts of principal debt, including capital leases, maturing during the next five
years and thereafter are as follows ($ in millions): $245 in 2010, $540 in 2011, $853 in 2012, $4 in 2013,
$660 in 2014 and $1,951 thereafter.
The weighted-average interest rate on total debt was 6.6% and 6.2% as of September 25, 2009 and
September 26, 2008, respectively, excluding the impact of interest rate swaps. The weighted-average
interest rate on short-term debt was 0.3% and 6.1% as of September 25, 2009 and September 26, 2008,
respectively. The impact of the Company’s interest rate swap agreements on reported interest expense
was a net decrease of $6 million for 2009, and not material for 2008 and 2007.
13. Guarantees
Certain of the Company’s business segments have guaranteed the performance of third-parties and
provided financial guarantees for uncompleted work and financial commitments. The terms of these
guarantees vary with end dates ranging from 2009 through the completion of such transactions. The
guarantees would typically be triggered in the event of nonperformance and performance under the
guarantees, if required, would not have a material effect on the Company’s financial position, results of
operations or cash flows.
There are certain guarantees or indemnifications extended among Tyco, Covidien and Tyco
Electronics in accordance with the terms of the Separation and Distribution Agreement and the Tax
Sharing Agreement. The guarantees primarily relate to certain contingent tax liabilities included in the
Tax Sharing Agreement. At the time of the Separation, Tyco recorded a liability necessary to recognize
the fair value of such guarantees and indemnifications. In the absence of observable transactions for
identical or similar guarantees, the Company determined the fair value of these guarantees and
indemnifications utilizing expected present value measurement techniques. Significant assumptions
utilized to determine fair value included determining a range of potential outcomes, assigning a
probability weighting to each potential outcome and estimating the anticipated timing of resolution.
The probability weighted outcomes were discounted using the Company’s incremental borrowing rate.
The liability necessary to reflect the fair value of the guarantees and indemnifications under the Tax
Sharing Agreement is $554 million, which is included in other liabilities on the Company’s Consolidated
Balance Sheets as of September 25, 2009 and September 26, 2008. The guarantees primarily relate to
certain contingent tax liabilities included in the Tax Sharing Agreement. See Note 6 for further
discussion of the Tax Sharing Agreement.
In addition, Tyco historically provided support in the form of financial and/or performance
guarantees to various Covidien and Tyco Electronics operating entities. In connection with the
Separation, the Company worked with the guarantee counterparties to cancel or assign these
guarantees to Covidien or Tyco Electronics. To the extent these guarantees were not assigned prior to
the Separation date, Tyco assumed primary liability on any remaining such support. The estimated fair
value of these obligations is $4 million and $7 million, which are included in other liabilities on the
Company’s Consolidated Balance Sheets as of September 25, 2009 and September 26, 2008,
respectively, with an offset to shareholders’ equity on the Separation date.
2009 Financials 127