ADT 2012 Annual Report Download - page 165

(1) Represents the fair value of BHS stock option, restricted stock unit and deferred stock unit replacement
awards attributable to pre-combination service issued to holders of these awards in the acquisition. The fair
value was determined using the Black-Scholes model for stock option awards and Tyco’s closing stock price
for the restricted and deferred stock unit awards. The fair value of outstanding BHS stock-based
compensation awards that immediately vested at the effective time of the acquisition was attributed to
pre-combination service and was included in the consideration transferred. In addition, there were certain
BHS stock-based compensation awards that did not immediately vest upon completion of the acquisition.
For those awards, the fair value attributed to post-combination service is being recognized as compensation
expense over the requisite service period in the post-combination financial statements.
Fair Value Allocation of Consideration Transferred to Assets Acquired and Liabilities Assumed—The
consideration transferred for BHS has been allocated to identifiable assets acquired and liabilities assumed as of
the acquisition date. The following amounts represent the final determination of the fair value of the identifiable
assets acquired and liabilities assumed ($ in millions):
Net current assets(1) .................................................. $ 78
Subscriber system assets .............................................. 624
Other property and equipment .......................................... 49
Contracts and related customer relationships (10-year weighted average useful
life) ............................................................. 738
Other intangible assets (4-year weighted average useful life) .................. 12
Net non-current liabilities(2) ............................................ (459)
Net assets acquired ................................................... 1,042
Goodwill(3) ......................................................... 932
Purchase price ...................................................... $1,974
(1) As of the acquisition date, the fair value of accounts receivable approximated book value. Included in net
current assets is $32 million of accounts receivable. The gross contractual amount receivable was
approximately $35 million of which $3 million was not expected to be collected.
(2) Included in net non-current liabilities is approximately $456 million of deferred tax liabilities.
(3) The goodwill recognized is primarily related to expected synergies and other benefits that the Company
believes will result from combining the operations of BHS with the operations of the Company. All of the
goodwill has been allocated. None of the goodwill is expected to be deductible for tax purposes.
Actual BHS Financial Results—BHS actual results from the acquisition date, May 14, 2010, which are
included in the Consolidated and Combined Statement of Operations for the fiscal year ended September 24,
2010 are as follows ($ in millions):
For the Year
Ended
September 24, 2010
Revenue ................................................... $193
Net loss .................................................... $(25)
Supplemental Pro Forma Financial Information (unaudited)—The supplemental pro forma financial
information for the fiscal year ended September 24, 2010 is as follows ($ in millions):
For the Year
Ended
September 24, 2010
Revenue ................................................... $2,942
Net income ................................................. $ 263
73