ADT 2009 Annual Report Download - page 220

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Guarantees (Continued)
In disposing of assets or businesses, the Company often provides representations, warranties and/or
indemnities to cover various risks including, for example, unknown damage to the assets, environmental
risks involved in the sale of real estate, liability to investigate and remediate environmental
contamination at waste disposal sites and manufacturing facilities, and unidentified tax liabilities and
legal fees related to periods prior to disposition. The Company has no reason to believe that these
uncertainties would have a material adverse effect on the Company’s financial position, results of
operations or cash flows.
The Company has recorded liabilities for known indemnifications included as part of
environmental liabilities. See Note 15 for a discussion of these liabilities.
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.
At September 25, 2009, the Company had total outstanding letters of credit and bank guarantees
of $659 million.
The Company records estimated product warranty costs at the time of sale. For further
information on estimated product warranty, see Note 1.
The changes in the carrying amount of the Company’s warranty accrual for 2009 were as follows ($
in millions):
Balance as of September 26, 2008 ....................................... $103
Warranties issued during the year ....................................... 35
Changes in estimates ................................................. 4
Settlements ....................................................... (61)
Currency translation ................................................. —
Balance as of September 25, 2009 ....................................... $ 81
In 2001, a division of Safety Products initiated a Voluntary Replacement Program (‘‘VRP’’)
associated with the acquisition of Central Sprinkler. The VRP relates to the replacement of certain
O-ring seal sprinkler heads which were originally manufactured by Central Sprinkler prior to Tyco’s
acquisition. Under this program, the sprinkler heads are being replaced free of charge to property
owners. On May 1, 2007, the Consumer Products Safety Commission and the Company announced an
August 31, 2007 deadline for filing claims to participate in the VRP. The Company will fulfill all valid
claims for replacement of qualifying sprinklers received up to August 31, 2007. Settlements during 2009,
2008 and 2007 include cash expenditures of $33 million, $49 million and $38 million, respectively,
related to the VRP. The Company believes the remaining liability represents its best estimate of the
cost required to complete the VRP as of September 25, 2009, which is not material.
14. Financial Instruments
Derivative Instruments
The Company’s financial instruments consist primarily of cash and cash equivalents, accounts
receivable, investments, accounts payable, debt and derivative financial instruments. The fair value of
cash and cash equivalents, accounts receivable and accounts payable approximated book value as of
128 2009 Financials