ADT 2009 Annual Report Download - page 230

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Commitments and Contingencies (Continued)
of September 25, 2009, Tyco concluded that the best estimate within this range is approximately
$40 million, of which $12 million is included in accrued and other current liabilities and $28 million is
included in other liabilities in Tyco’s Consolidated Balance Sheet. 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’’) for the estimated future costs associated
with legal obligations to retire certain assets. As of September 25, 2009 and September 26, 2008, the
Company’s AROs were $11 million and $13 million, respectively. 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.
Asbestos Matters
The Company and certain of its subsidiaries are named as defendants in bodily injury lawsuits
based on alleged exposure to asbestos-containing materials. These cases typically involve product
liability claims based primarily on allegations of manufacture, sale or distribution of industrial products
that either contained asbestos or were attached to or used with asbestos-containing components
manufactured by third-parties. Each case typically names between dozens to hundreds of corporate
defendants. While the Company has observed an increase in the number of these lawsuits over the past
several years, including lawsuits by plaintiffs with mesothelioma-related claims, a large percentage of
these suits have not presented viable legal claims and, as a result, have been dismissed by the courts.
The Company’s strategy has been, and continues to be, to mount a vigorous defense aimed at having
unsubstantiated suits dismissed, and, where appropriate, settling suits before trial. Although a large
percentage of litigated suits have been dismissed, the Company cannot predict the extent to which it
will be successful in resolving lawsuits in the future. Of the lawsuits that have proceeded to trial since
2005, the Company has won or settled all but one case, with that one case returning an adverse jury
verdict for approximately $7.7 million, which included both compensatory and punitive damages. The
Company has appealed the verdict and believes that it will ultimately be overturned. As of
September 25, 2009, there were 4,200 lawsuits pending against the Company and its subsidiaries. Each
lawsuit typically includes several claims, and the Company has determined that it had 5,509, 6,569 and
6,461 claims outstanding as of September 25, 2009, September 26, 2008 and September 28, 2007,
respectively. These amounts reflect adjustments for claims that are not actively being prosecuted,
identify incorrect defendants or are duplicative of other actions.
Annually, in the fiscal fourth quarter, the Company performs an analysis to update its estimated
asbestos-related assets and liabilities. The Company’s estimate of the liability and corresponding
insurance recovery for pending and future claims and defense costs is based on claim experience over
the past five years and covers claims expected to be filed, including related defense costs, over the next
seven years on an undiscounted basis. Due to a high degree of uncertainty regarding the pattern and
length of time over which claims will be made and other factors, the Company has concluded that
estimating the liability beyond the seven year period will not provide a reasonable estimate, and
accordingly has not recorded a liability for asbestos-related costs beyond 2016. The Company’s estimate
of asbestos-related insurance recoveries represents estimated amounts due to the Company for
previously paid and settled claims and the probable reimbursements relating to its estimated liability for
138 2009 Financials