ADT 2007 Annual Report Download - page 229

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Commitments and Contingencies (Continued)
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.
Tyco has recorded asset retirement obligations (‘‘AROs’’) according to the provisions of SFAS
No. 143, ‘‘Accounting for Asset Retirement Obligations,’’ and FIN No. 147 for the estimated future costs
associated with legal obligations to retire certain assets. As of September 28, 2007 and September 29,
2006, the Company’s AROs were $13 million in both periods. 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 7.
Asbestos Matters
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 Covidien’s subsidiaries. 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. 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 the lawsuits that have been filed against it and its subsidiaries. To date, 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.
The Company estimates its pending asbestos claims and claims that were incurred but not
reported, as well as related insurance and indemnification recoveries. The Company’s estimate of the
liability for pending and future claims is based on claim experience over the past five years and covers
2007 Financials 137