ADT 2009 Annual Report Download - page 116

Company’s share of this amount was approximately $24 million, with Covidien and Tyco Electronics
responsible for approximately $38 million and $28 million, respectively.
During the second quarter of 2009, the Company concluded that its best estimate of probable loss
for the legacy securities matters outstanding at the time was $375 million in the aggregate, which the
Company recorded as a liability in accrued and other current liabilities in the Consolidated Balance
Sheet as of March 27, 2009. Due to the sharing provisions in the Separation and Distribution
Agreement described above, the Company also recorded receivables from Covidien and Tyco
Electronics in the amounts of $158 million and $116 million, respectively, which were recorded in other
current assets in the Company’s Consolidated Balance Sheet as of March 27, 2009. As a result, the
Company recorded a net charge of $101 million related to legacy securities matters during the quarter
ended March 27, 2009 in selling, general, and administrative expenses in the Consolidated Statement of
Operations.
In the second half of fiscal 2009, the Company agreed to settle with all of the remaining plaintiffs
that had opted-out of the class action settlement as well as plaintiffs who had brought Employee
Retirement Income Security Act (‘‘ERISA’’) related claims for a total of $271 million. Pursuant to the
Separation and Distribution Agreement, the Company’s share of the settlement amount was
approximately $73 million, with Covidien and Tyco Electronics responsible for approximately
$114 million and $84 million, respectively. This settlement activity did not result in the Company
recording a charge to its Consolidated Statements of Operations as the Company had established a
reserve for its best estimate of the amount of loss during the second quarter of 2009 as discussed
above.
The Company continues to believe that the accrual remaining as of September 25, 2009 is its best
estimate for the remaining unresolved claims. Although the Company has reserved its best estimate of
probable loss related to unresolved legacy securities claims, their ultimate resolution could differ from
this estimate and could have a material adverse effect on the Company’s financial position, results of
operations or cash flows.
In addition to the Stumpf matter, Tyco is a party to several lawsuits based on alleged violations of
federal securities laws, fraud and negligence committed by former management. These previously
reported matters consist of Jasin v. Tyco International Ltd., et al., an action brought by a pro se plaintiff,
Hall v. Kozlowski, et al, an action brought by a pro se plaintiff relating to the plaintiff’s employment,
401(k), pension plans and ownership of Tyco common stock, and several affirmative actions brought by
Tyco against Messrs. Kozlowski, Swartz and Walsh, former executives and a director of Tyco. In
connection with our affirmative actions, Messrs. Kozlowski and Swartz have made counterclaims
seeking amounts allegedly due in connection with the former executives’ compensation and retention
arrangements and under ERISA, and Mr. Walsh has made claims alleging that Tyco is required to
indemnify him for his defense costs arising from his role as a Tyco director. Tyco intends to vigorously
defend each of these actions and does not believe that the ultimate outcome of any of these matters
will have a material adverse affect on its financial position, results of operations or cash flows.
Under the terms of the Separation and Distribution Agreement, each of Tyco, Covidien and Tyco
Electronics are jointly and severally liable for the full amount of any legacy securities matters
(excluding the counter-claims brought by former executives and a director described above.)
Environmental Matters
Tyco is involved in various stages of investigation and cleanup related to known 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 25, 2009, Tyco concluded that it was
probable that it would incur remedial costs in the range of approximately $31 million to $85 million. As
of September 25, 2009, Tyco concluded that the best estimate within this range is approximately
24 2009 Financials