ADT 2009 Annual Report Download - page 119

the Fund can prove that an employer completely or partially withdraws from a multi-employer pension
plan such as the Fund, the employer is liable for withdrawal liability equal to its proportionate share of
the plan’s unfunded vested benefits. The alleged withdrawal results from a 1994 labor dispute between
Grinnell Fire Protection Systems, SimplexGrinnell’s predecessor, and Road Sprinkler Fitters Local
Union No. 669.
ERISA requires that payment of withdrawal liability be made in full or in quarterly installments
commencing upon receipt of a liability assessment from the plan. A plan’s assessment of withdrawal
liability generally may be challenged only in arbitration, and ERISA requires that quarterly payments
must continue to be made during the pendency of the arbitration. If the employer prevails in
arbitration (and any subsequent court appeals), its quarterly withdrawal liability payments are refunded
with interest. The Fund’s total withdrawal liability assessment against SimplexGrinnell is approximately
$25 million. The quarterly withdrawal liability payments are $1.1 million, $11 million of which have
been paid to date. While the ultimate outcome is uncertain, SimplexGrinnell believes that it has strong
arguments that no withdrawal liability is owed to the Fund, and it plans to vigorously defend against
the Fund’s withdrawal liability assessment. The matter is currently in arbitration. The Company has
made no provision for this contingency and believes that its quarterly payments are recoverable.
Other Matters
As previously reported, in 2002, the SEC’s Division of Enforcement conducted an investigation
related to past accounting practices for dealer connect fees that ADT had charged to its authorized
dealers upon purchasing customer accounts. The investigation related to accounting practices employed
by our former management, which were discontinued in 2003. Although we settled with the SEC in
2006, a number of former dealers and related parties have filed lawsuits against us, including a class
action lawsuit filed in the District Court of Arapahoe County, Colorado, alleging breach of contract
and other claims related to ADT’s decision to terminate certain authorized dealers in 2002 and 2003.
While it is not possible at this time to predict the final outcome of these lawsuits, we do not believe
these claims will have a material adverse effect on the Company’s financial position, results of
operations or cash flows.
In addition to the foregoing, we are subject to claims and suits, including from time to time,
contractual disputes and product and general liability claims incidental to present and former
operations, acquisitions and dispositions. With respect to many of these claims, we either self-insure or
maintain insurance through third-parties, with varying deductibles. While the ultimate outcome of these
matters cannot be predicted with certainty, we believe that the resolution of any such proceedings,
whether the underlying claims are covered by insurance or not, will not have a material adverse effect
on our financial condition, results of operations or cash flows beyond amounts recorded for such
matters.
Item 4. Submission of Matters to a Vote of Security Holders
None.
2009 Financials 27