ADT 2003 Annual Report Download - page 110

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Tyco is involved in various stages of investigation and
cleanup related to environmental remediation matters at a
number of sites. The ultimate cost of site cleanup is difficult to
predict given the uncertainties regarding the extent of the
required cleanup, the interpretation of applicable laws and reg-
ulations and alternative cleanup methods. As of September 30,
2003, Tyco concluded that it was probable that it would incur
remedial costs in the range of approximately $142 million to
$451 million. As of September 30, 2003, Tyco concluded that
the best probable estimate within this range is approximately
$270 million, of which $32 million is included in accrued
expenses and other current liabilities and $238 million is
included in other long-term liabilities on the Consolidated
Balance Sheet. In view of the Company’s financial position and
reserves for environmental matters of $270 million, the
Company has concluded that any potential payment of such
estimated amounts will not have a material adverse effect on its
financial position, annual results of operations or cash flows.
Like many other companies, Tyco and some of our sub-
sidiaries are named as defendants in personal injury lawsuits
based on alleged exposure to asbestos-containing materials.
Consistent with the national trend of increased asbestos-related
litigation, we have observed an increase in the number of these
lawsuits in the past several years. The majority of these cases
have been filed against subsidiaries in our Healthcare division
and our Engineered Products and Services division. A limited
number of the cases allege premises liability, based on claims
that individuals were exposed to asbestos while on a subsidiary’s
property. Some of the cases involve product liability claims,
based principally on allegations of past distribution of heat-
resistant industrial products incorporating asbestos or the past
distribution of industrial valves that incorporated asbestos-
containing gaskets or packing. Each case typically names
between dozens to hundreds of corporate defendants.
Tyco’s involvement in asbestos cases has been limited
because our subsidiaries did not mine or produce asbestos.
Furthermore, in our experience, a large percentage of these
claims were never substantiated and have been dismissed by the
courts. Our vigorous defense of these lawsuits has resulted in
judgments in our favor in all cases tried to verdict. We have not
suffered an adverse verdict in a trial court proceeding related to
asbestos claims.
When appropriate, we settle claims. However, the total
amount paid to date to settle and defend all asbestos claims has
been immaterial. As of September 30, 2003, there were approx-
imately 14,000 asbestos liability cases pending against us and
our subsidiaries.
We believe that we and our subsidiaries have substantial
indemnification protection and insurance coverage, subject to
applicable deductibles, with respect to asbestos claims. These
indemnitors and the relevant carriers typically have been
honoring their duty to defend and indemnify. We believe that
we have valid defenses to these claims and intend to continue to
defend them vigorously. Additionally, based on our historical
experience in asbestos litigation and an analysis of our current
cases, we believe that we have adequate amounts accrued for
potential settlements and adverse judgments in asbestos-related
litigation. While it is not possible at this time to determine
with certainty the ultimate outcome of these asbestos-related
proceedings, we believe that the final outcome of all known and
anticipated future claims, after taking into account our sub-
stantial indemnification rights and insurance coverage, will not
have a material adverse effect on our financial position, annual
results of operations or cash flows.
23.
Retirement Plans
Defined Benefit Pension Plans The Company has a number of
noncontributory and contributory defined benefit retirement
plans covering certain of its U.S. and non-U.S. employees,
designed in accordance with conditions and practices in the
countries concerned. Net periodic pension benefit cost (income)
is based on periodic actuarial valuations which use the pro-
jected unit credit method of calculation and is charged to the
Consolidated Statements of Operations on a systematic basis
over the expected average remaining service lives of current
employees. Contribution amounts are determined based on the
advice of professionally qualified actuaries in the countries con-
cerned. The Company’s funding policy is to make contributions
in accordance with the laws and customs of the various countries
in which it operates as well as to make discretionary voluntary
contributions. The benefits under the defined benefit plans
TYCO INTERNATIONAL LTD.
Notes to Consolidated Financial Statements