ADT 2007 Annual Report Download - page 236

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Commitments and Contingencies (Continued)
Sensormatic Security Corp. v. Sensormatic Electronics Corp., ADT Security Services, Inc. and Wallace
Computer Services, Inc. In April 2002, litigation was commenced in the United States District Court for
the District of Maryland by a Sensormatic franchisee, Sensormatic Security Corp. (‘‘SSC’’), alleging
breach of contract against Sensormatic and tortuous interference with contract against ADT and
Wallace Computer Services, Inc., a party unrelated to Tyco. The litigation was based on allegedly
unpaid commissions under a franchise agreement. The lawsuit also alleges that Sensormatic improperly
authorized third parties (including ADT and Wallace) to sell in SSC’s exclusive territory of Maryland,
Virginia and the District of Columbia. Sensormatic has agreed to indemnify Wallace. SSC seeks an
accounting, monetary damages (including punitive damages against ADT and Wallace), and injunctive
relief. Sensormatic and ADT have denied SSC’s allegations and asserted affirmative defenses.
Sensormatic also filed a counterclaim seeking recovery of overpayments made to SSC. On September 7,
2006, the trial court denied in part and granted in part the parties’ cross motions for summary
judgment. Among other things, the Court ruled that SSC has the right to commissions on all
Sensormatic CCTV products (not just SensorVision systems) if sold for automatic theft detection in the
franchise territory and SSC has the right to commissions on CCTV indirect sales if sold for automatic
theft detection in the franchise territory. Sensormatic and ADT intend to appeal those rulings.
Sensormatic and ADT will continue to vigorously defend the litigation. While it is not possible at this
time to predict the final outcome of this dispute, Tyco does not believe this action will have a material
adverse effect on its financial position, results of operations or cash flows.
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.
17. Retirement Plans
In September 2006, the FASB issued SFAS No. 158. SFAS No. 158 requires the recognition of the
funded status of defined benefit pension and other postretirement benefit plans on the Company’s
Consolidated Balance Sheets. SFAS No. 158 requires recognition of the actuarial gains or losses and
prior service costs that have not yet been included in net periodic benefit cost as a component of
accumulated other comprehensive income, net of tax. The Company adopted the recognition and
disclosure provisions of SFAS No. 158 on September 28, 2007. The Company uses a measurement date
of August 31st.
The table below presents the incremental effect of applying SFAS No. 158 on individual line items
in the Consolidated Balance Sheet at September 28, 2007 ($ in millions):
Before After
Application Application
of SFAS of SFAS
No. 158 Adjustments No. 158
Prepaid expenses and other current assets ............ $1,350 $(172) $1,178
Intangible assets, net ........................... 2,707 (10) 2,697
Other assets .................................. 2,428 98 2,526
Accrued and other current liabilities ................ 2,898 23 2,921
Other liabilities ............................... 3,943 4 3,947
Accumulated other comprehensive income ............ 454 111 565
144 2007 Financials