ADT 2005 Annual Report Download - page 198

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Commitments and Contingencies (Continued)
U.S. Surgical’s motion for summary judgment. Applied Medical is appealing the summary judgment
ruling. Briefing on Applied Medical’s appeal has concluded and oral argument has not yet been
scheduled.
Environmental
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
regulations and alternative cleanup methods. As of September 30, 2005, Tyco concluded that it was
probable that it would incur remedial costs in the range of approximately $143 million to $420 million.
As of September 30, 2005, Tyco concluded that the best estimate within this range is approximately
$215 million, of which $33 million is included in accrued and other current liabilities and $182 million
is included in other liabilities on our Consolidated Balance Sheets. In view of the Company’s financial
position and reserves for environmental matters of $215 million, the Company believes that any
potential payment of such estimated amounts will not have a material adverse effect on its financial
position, results of operations or cash flows.
Tyco recorded asset retirement obligations (ARO) according to the provisions of SFAS No. 143,
‘‘Accounting for Asset Retirement Obligations,’’ for future decommissioning costs based upon cost
estimates associated with legal obligation to decommission two nuclear facilities. As of September 30,
2005 and 2004, the Company’s ARO obligations were $69 million and $46 million, respectively. The
increase in the reserve during the year is primarily due to accretion of $7 million and revisions to our
cost estimate of $16 million. The Company believes that any potential payment on such estimated
amounts will not have a material adverse effect on its financial position, results of operations or cash
flows.
Asbestos
Tyco and some of its subsidiaries 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, the Company has 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 Healthcare
and Engineered Products and Services. A limited number of the cases allege premises liability, based
on claims that individuals were exposed to asbestos while on a subsidiary’s property. A majority 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 its subsidiaries did not mine or
produce asbestos. Furthermore, in the Company’s experience, a large percentage of these claims were
never substantiated and have been dismissed by the courts. The Company will continue to vigorously
defend these lawsuits and the Company has not suffered an adverse verdict in a trial court proceeding
related to asbestos claims. When appropriate, the Company settles claims. However, the total amount
paid to date to settle and defend all asbestos claims has been immaterial. As of September 30, 2005,
there were approximately 14,000 asbestos liability cases pending against the Company and its
subsidiaries.
122 2005 Financials