ADT 2007 Annual Report Download - page 226

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Financial Instruments (Continued)
value of the asset and the conversion option. At September 28, 2007, the fair value of the asset and the
conversion option liability were $19 million and $15 million, respectively.
16. Commitments and Contingencies
The Company has facility, vehicle and equipment leases that expire at various dates through the
year 2027. Rental expense under these leases was $410 million, $390 million, and $405 million for 2007,
2006 and 2005, respectively. The Company also has facility and equipment commitments under capital
leases.
Following is a schedule of minimum lease payments for non-cancelable leases as of September 28,
2007 ($ in millions):
Operating Capital
Leases Leases
2008 .................................................... $ 291 $14
2009 .................................................... 226 12
2010 .................................................... 171 10
2011 .................................................... 123 8
2012 .................................................... 72 6
Thereafter ............................................... 157 55
$1,040 105
Less: amount representing interest .............................. 41
Total minimum lease payments ............................... $64
The Company also has purchase obligations related to commitments to purchase certain goods and
services. At September 28, 2007, such obligations were as follows: $114 million in 2008, $7 million in
2009, $3 million in 2010 and $0 million thereafter.
In the normal course of business, the Company is liable for contract completion and product
performance. In the opinion of management, such obligations will not significantly affect the
Company’s financial position, results of operations or cash flows.
In connection with the Separation, the Company entered into a liability sharing agreement
regarding certain class actions that were pending against Tyco prior to the Separation. Subject to the
terms and conditions of the Separation and Distribution Agreement, the Company will manage and
control all the legal matters related to assumed contingent liabilities as described in the Separation and
Distribution Agreement, including the defense or settlement thereof, subject to certain limitations.
Tyco has assumed 27%, Covidien has assumed 42% and Tyco Electronics has assumed 31% of
certain Tyco pre-Separation contingent and other corporate liabilities, which include securities class
action litigation, ERISA class action litigation, certain legacy tax contingencies and any actions with
respect to the spin-offs or the distributions made or brought by any third party except for litigation
related to our public debt. Any amounts relating to these contingent and other corporate liabilities paid
by Tyco after the spin-offs that are subject to the allocation provisions of the Separation and
Distribution Agreement will be shared among Tyco, Covidien and Tyco Electronics pursuant to the
same allocation ratio. As described in the Separation and Distribution Agreement, Tyco, Tyco
Electronics and Covidien are jointly and severally liable for all amounts relating to the previously
134 2007 Financials