ADT 2011 Annual Report Download - page 197

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Divestitures (Continued)
In connection with the sale, the Company determined the fair value of its retained ownership
interest in Atkore by implying a total equity value of Atkore using the price paid by the Investor for
the Preferred Stock less the expected present value of dividends to be paid on the Preferred Stock (the
‘‘Implied Equity Value’’). The discount rate used to determine the present value of the expected
dividends was calculated by taking the average of the stated return on the Preferred Stock pursuant to
the Agreement and Atkore’s estimated cost of equity. The Implied Equity Value was then allocated to
the Company’s retained ownership interest. To arrive at the fair value of the Company’s retained
ownership interest, the Company applied a discount factor to the Company’s allocated Implied Equity
Value due to the lack of marketability of the common stock of Atkore, which is now privately held. The
fair value of the Company’s retained ownership interest was determined to be $137 million, resulting in
the Company recognizing a $49 million gain upon deconsolidation during the first quarter of fiscal
2011, which is included in the gain on sale noted above. Tyco’s retained ownership interest in Atkore is
accounted for under the equity method of accounting and is recorded in other assets in the Company’s
Consolidated Balance Sheet as of September 30, 2011. The Company’s proportionate share of Atkore’s
net income (loss) is recorded within other expense, net in the Company’s Consolidated Statements of
Operations as the amounts were not material. The Company recorded an equity loss of $9 million for
the year ended September 30, 2011.
Fiscal 2010
During the fourth quarter of 2009, the Company approved a plan to sell its French security
business, which was part of the Company’s Tyco Security Solutions segment. The results of operations
were presented in continuing operations as the criteria for discontinued operations had not been met.
During the second quarter of 2010, the Company completed the sale and recorded a $53 million
pre-tax gain within restructuring, asset impairment and divestiture (gains) charges, net in the
Company’s Consolidated Statements of Operations.
Fiscal 2009
During the third quarter of 2008, the Company approved a plan to sell a business in its Tyco
Security Solutions segment. This business had been classified as held for sale in the Company’s
historical Consolidated Balance Sheet. During the second quarter of 2009, due to a change in strategy
by management, the Company decided not to sell the business. As a result, the business no longer
satisfied the requirements to be classified as held for sale. The Company measured the business at the
lower of its (i) carrying amount before it was classified as held for sale, adjusted for depreciation and
amortization expense that would have been recognized had the business been continuously classified as
held and used, or (ii) fair value at the date the decision not to sell was made. The Company recorded a
charge of $8 million in the second quarter of 2009 relating to the amount of depreciation and
amortization expense that would have been recorded had the asset been continuously classified as held
and used.
Discontinued Operations
Fiscal 2011
On September 30, 2010, the Company sold its European water business, which was part of the
Company’s Flow Control segment. The sale was completed for approximately $264 million in cash
94 2011 Financials