ADT 2006 Annual Report Download - page 197

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. Commitments and Contingencies (Continued)
which the district court denied on December 23, 2003. On February 7, 2005, the district court granted
U.S. Surgical’s motion for summary judgment. Applied Medical appealed the summary judgment ruling.
On May 15, 2006, the United States Court of Appeals for the Federal Circuit issued a decision on the
appeal vacating the district court’s grant of summary judgment and remanding the case for further
proceedings. The district court has scheduled trial in this case for July 10, 2007. It is not possible to
estimate the amount of loss or probable losses, if any, that might result from an adverse resolution of
this matter.
Environmental Matters
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 29, 2006, Tyco concluded that it was
probable that it would incur remedial costs in the range of approximately $124 million to $406 million.
As of September 29, 2006, Tyco concluded that the best estimate within this range is approximately
$184 million, of which $34 million is included in accrued and other current liabilities and $150 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 $184 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 (AROs) according to the provisions of SFAS No. 143,
‘‘Accounting for Asset Retirement Obligations,’’ for the estimated future costs associated with legal
obligations to decommission two nuclear facilities. With the clarification outlined by FIN No. 47 for
valuation of conditional AROs, Tyco reassessed its overall ARO and recorded an additional
$32 million. As of September 29, 2006 and September 30, 2005, the Company’s AROs were
$111 million and $69 million, respectively. The increase in the reserve during 2006 is primarily due to
the adoption of FIN No. 47. In addition, the Company recorded an insignificant amount of accretion,
new cost estimates and foreign currency translation related to AROs during 2006. 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. See further discussions on the
implementation of FIN No. 47 in Note 1.
Asbestos Matters
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.
2006 Financials 135