ADT 2006 Annual Report Download - page 126

known and anticipated future claims, after taking into account its substantial indemnification rights and
insurance coverage, will not have a material adverse effect on the Company’s financial position, results
of operations or cash flows.
Income Taxes
Tyco and its subsidiaries’ income tax returns are periodically examined by various tax authorities.
In connection with such examinations, tax authorities, including the IRS, have raised issues and
proposed tax adjustments. The Company is reviewing and contesting certain of the proposed tax
adjustments. Amounts related to these tax adjustments and other tax contingencies that management
has assessed as probable and estimable have been recorded. While the timing and ultimate resolution
of these matters is uncertain, the Company anticipates that certain of these matters could be resolved
during 2007.
Compliance Matters
Tyco has received and responded to various allegations that certain improper payments were made
by Tyco subsidiaries in recent years. During 2005, Tyco reported to the U.S. Department of Justice
(‘‘DOJ’’) and the SEC the investigative steps and remedial measures that it has taken in response to
the allegations. Tyco also informed the DOJ and the SEC that it has retained outside counsel to
perform a company-wide baseline review of its policies, controls and practices with respect to
compliance with the Foreign Corrupt Practices Act, that it would continue to make periodic progress
reports to these agencies, and that it would present its factual findings upon conclusion of the baseline
review. The Company has and will continue to have communications with the DOJ and SEC to provide
updates on the baseline review being conducted by outside counsel, including, as appropriate, briefings
concerning additional instances of potential improper payments identified by the Company in the
course of its ongoing compliance activities.
At this time, Tyco cannot predict the outcome of these matters reported to regulatory and law
enforcement authorities and therefore cannot estimate the range of potential loss or extent of risk, if
any, that may result from an adverse resolution of any or all of these matters.
Other Matters
The Company is a party to a contract dispute arising from Earth Tech’s contract with the City of
Phoenix, Arizona for the expansion of the City’s 91st Avenue Waste Water Treatment Plant. Both Earth
Tech and the City of Phoenix have filed lawsuits in the local county superior court alleging the other
party has breached the contract. At this time, Tyco cannot predict the outcome of this matter and
therefore cannot estimate the range of potential loss or extent of risk, if any, that may result from an
adverse resolution of this matter. For a detailed discussion of contingencies related to Tyco’s other legal
matters, see Note 18 to our Consolidated Financial Statements.
The Company is a defendant in a number of other pending legal proceedings incidental to present
and former operations, acquisitions and dispositions. The Company does not expect the outcome of
these proceedings, either individually or in the aggregate, to have a material adverse effect on its
financial position, results of operations or cash flows.
Backlog
At September 29, 2006, we had a backlog of unfilled orders of $14.2 billion, compared to a
backlog of $13.5 billion at September 30, 2005. We expect that approximately 77% of our backlog at
64 2006 Financials