ADT 2011 Annual Report Download - page 223

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Goodwill and Intangible Assets (Continued)
Fiscal 2009 Intangible Asset Impairment
The Company began to experience a decline in revenue during the first quarter of 2009 at its Tyco
Security Solutions segment 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 Tyco Security Solutions segment 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 Sensormatic tradename as well as 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 Tyco Security Solutions Sensormatic
tradename and 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
120 2011 Financials