ADT 2007 Annual Report Download - page 130

As previously reported in our periodic filings, on January 27, 2006, we received from the New
Jersey Division of Criminal Justice Office of the Attorney General a subpoena to produce documents
concerning, among other things, former employees, the use of certain chemicals, and the filing of
reports under state and federal environmental reporting laws at the same New Jersey facility sold by
Tyco in 2000. The subpoena seeks information for the period from January 1987 to December 2000. We
have provided information in response to the subpoena and discussed the matter with the agency. At
this time, we 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. Tyco continues to
cooperate fully with the investigators.
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 28, 2007, Tyco concluded that it was
probable that it would incur remedial costs in the range of approximately $36 million to $63 million. As
of September 28, 2007, Tyco concluded that the best estimate within this range is approximately
$40 million, of which $11 million is included in accrued and other current liabilities and $29 million is
included in other liabilities on Tyco’s Consolidated Balance Sheets. In view of the Company’s financial
position and reserves for environmental matters, 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.
Asbestos Matters
As previously reported in its periodic filings, Tyco and some of its subsidiaries and certain
subsidiaries of Covidien are named as defendants in personal injury lawsuits based on alleged exposure
to asbestos-containing materials. Pursuant to the Separation and Distribution Agreement, Covidien has
assumed all liabilities for pending cases filed against its subsidiaries. Each case typically names between
dozens to hundreds of corporate defendants. The complaints generally seek monetary damages for
personal injury or bodily injury resulting from alleged exposure to products containing asbestos. 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 in any year to settle and defend all asbestos claims has
been immaterial. As of September 28, 2007 there were approximately 5,600 asbestos liability cases
pending against the Company and its subsidiaries.
Income Tax Matters
During the third quarter of 2007, the IRS concluded its field examination of certain of Tyco’s U.S.
federal income tax returns for the years 1997 through 2000 and issued anticipated Revenue Agents’
Reports (‘‘RARs’’) which reflect the IRS’ determination of proposed tax adjustments for the periods
under audit. The RARs propose tax audit adjustments to certain of the Company’s previously filed tax
return positions, all of which the Company expected and previously assessed at each balance sheet date.
Accordingly, the Company has made no additional provision during the year ended September 28, 2007
as a result of the proposed audit adjustments in the RARs.
The Company has agreed with the IRS on adjustments totaling $498 million, with an estimated
cash impact to the Company of $458 million, and during the third quarter of 2007, the Company paid
$458 million, of which $163 million relates to the Company’s discontinued operations. The Company
appealed other proposed tax audit adjustments totaling approximately $1 billion, and, as Audit
Managing Party as specified in the Tax Sharing Agreement, the Company intends to vigorously defend
38 2007 Financials