ADT 2010 Annual Report Download - page 202

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Goodwill and Intangible Assets (Continued)
The estimated aggregate amortization expense on intangible assets is expected to be approximately
$550 million for 2011, $475 million for 2012, $400 million for 2013, $350 million for 2014 and
$300 million for 2015.
Fiscal 2009 Intangible Asset Impairment
The Company began to experience a decline in revenue during the first quarter of 2009 at its ADT
Worldwide and Safety Products segments due to a slowdown in the commercial markets including the
retailer end market. Although the Company considered and concluded these factors did not constitute
triggering events during the first quarter of 2009, the continued existence of these conditions during the
second quarter of 2009, along with downward revisions to forecast results, restructuring actions and
weaker industry outlooks, caused the Company to conclude that sufficient indicators of impairment
existed for certain indefinite-lived intangible assets. This deterioration of the business environment
related to the retailer business of the Company’s ADT Worldwide and Safety Products segments
resulted in a further lowering of management’s projections of revenues from the retailer end market
during the second quarter of 2009.
Based on these factors and uncertainties described above, estimates of future cash flows used in
determining the fair value of the Company’s Safety Products Sensormatic tradename as well as its ADT
Worldwide franchise rights relating to Winner and Sensormatic Security Corp (‘‘SSC’’) during the
second quarter of 2009 were revised downward relative to the estimates used in the Company’s most
recent test during the fourth quarter of 2008. The range of the discount rates utilized was increased to
reflect increased risk due to economic volatility and uncertainties related to demand for the Company’s
products and services. The discount rates were as follows:
Second Quarter Fourth Quarter
of 2009 of 2008
Discount Rate .................................. 12.0% to 12.3% 10.4%
The results of the impairment test indicated that the Safety Products Sensormatic tradename and
ADT Worldwide Winner and SSC franchise rights estimated fair values were less than their respective
carrying amounts. As such, the Company recorded an aggregate non-cash impairment charge of
$64 million ($40 million after-tax) which was recorded in goodwill and intangible asset impairments in
the Company’s Consolidated Statement of Operations for the quarter ended March 27, 2009.
Specifically, the Company recorded the following non-cash intangible asset impairment charges to
reduce the carrying amount of the following indefinite-lived intangible assets (in millions):
Pre-tax After-tax
Intangible Asset Charge Charge
Sensormatic tradename ....................................... $42 $26
Winner franchise rights ....................................... 14 9
SSC franchise rights ......................................... 8 5
Total .................................................... $64 $40
114 2010 Financials