ADT 2010 Annual Report Download - page 149

dollar relative to the Euro would result in a $25 million net increase in other comprehensive income.
Conversely, a 10% depreciation of the U.S. dollar relative to the Euro would result in a $30 million net
decrease in other comprehensive income.
As of September 24, 2010, and September 25, 2009 $3.0 billion of intercompany loans have been
designated as permanent in nature. For the fiscal years ended September 24, 2010 and September 25,
2009, we recorded $24 million and nil, respectively, of cumulative translation loss through accumulated
other comprehensive loss related to these loans.
Interest Rate Exposures
Our long-term debt portfolio primarily consists of fixed-rate instruments. The Company manages
its interest rate risk through the use of interest rate swap transactions with financial institutions acting
as principal counterparties, which were designated as fair value hedges for accounting purposes. During
the third quarter of 2009, first quarter of 2010 and third quarter of 2010, the Company entered into
interest rate swap transactions with the objective of managing the exposure to interest rate risk by
converting the interest rates on $1.4 billion, $500 million, and $501 million, respectively of fixed-rate
debt to variable rates. In these contracts, the Company agreed with financial institutions acting as
principal counterparties to exchange, at specified intervals, the difference between fixed and floating
interest amounts calculated on an agreed-upon notional principal amount. In connection with the
redemption of all of the 6.375% public notes due 2011 during the third quarter of 2010, the Company
terminated the corresponding interest rate swaps. As of September 24, 2010 and September 25, 2009,
the total gross notional amount of the Company’s interest rate swap contracts was $1.5 billion and
$1.4 billion, respectively. A 100 basis point increase in interest rates relative to interest rates as of
September 24, 2010 would result in a $37 million net decrease in the fair value of the contracts.
Conversely, a 100 basis point decrease in interest rates relative to interest rates as of September 24,
2010 would result in a $38 million net increase in the fair value of the contracts.
Commodity Exposures
We are exposed to volatility in the prices of raw materials used in some of our products and may,
in limited circumstances, enter into hedging contracts to manage those exposures. These exposures are
monitored as an integral part of our risk management program. During 2010, the Company entered
into commodity swaps for copper which are not designated as hedging instruments for accounting
purposes. These swaps did not have a material impact on the Company’s financial position, results of
operations or cash flows. Additionally, a 100 basis point increase or decrease in the price of copper as
of September 24, 2010 would not have a material impact on the Company’s financial position, results of
operations or cash flows.
Item 8. Financial Statements and Supplementary Data
The following consolidated financial statements and schedule specified by this Item, together with
the report thereon of Deloitte & Touche LLP, are presented following Item 15 of this report:
Financial Statements:
Management’s Responsibility for Financial Statements
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Operations for the years ended September 24, 2010,
September 25, 2009 and September 26, 2008
Consolidated Balance Sheets as of September 24, 2010 and September 25, 2009
2010 Financials 61