ADT 2010 Annual Report Download - page 115

arbitration (and any subsequent 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, $14.3 million of which has
been cumulatively paid through September 24, 2010. 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.
Broadview Security Contingency
On May 14, 2010, the Company acquired Broadview Security, which is a business that was formerly
owned by The Brink’s Company. Under the Coal Industry Retiree Health Benefit Act of 1992, as
amended (the ‘‘Coal Act’’), The Brink’s Company and its majority-owned subsidiaries at July 20, 1992
(including certain legal entities acquired in the Broadview Security acquisition) are jointly and severally
liable with certain of The Brink’s Company’s other current and former subsidiaries for health care
coverage obligations provided for by the Coal Act. A Voluntary Employees’ Beneficiary Associate
(‘‘VEBA’’) trust has been established by The Brink’s Company to pay for these liabilities, although the
trust may have insufficient funds to satisfy all future obligations. At the time of its spin-off from The
Brink’s Company, Broadview Security entered into an agreement in which The Brink’s Company agreed
to indemnify Broadview Security for any and all liabilities and expenses related to The Brink’s
Company’s former coal operations, including any health care coverage obligations. The Brink’s
Company has agreed that this indemnification survives the Company’s acquisition of Broadview
Security. The Company has evaluated its potential liability under the Coal Act as a contingency in light
of all known facts, including the funding of the VEBA, and indemnification provided by The Brinks
Company. The Company has concluded that no accrual is necessary due to the existence of the
indemnification and its belief that The Brink’s Company and the VEBA will be able to satisfy all future
obligations under the Coal Act.
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 the Company’s former management, which were discontinued in 2003. Although the Company
settled with the SEC in 2006, a number of former dealers and related parties have filed lawsuits against
the Company, 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. In February 2010, the Court granted a directed verdict in ADT’s
favor dismissing a number of the plaintiffs’ key claims. The plaintiffs have appealed this verdict. While
it is not possible at this time to predict the final outcome of these lawsuits, the Company does 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, the Company is 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, the Company either
self-insures or maintains insurance through third-parties, with varying deductibles. While the ultimate
outcome of these matters cannot be predicted with certainty, the Company believes 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 the Company’s financial condition, results of operations or cash flows beyond
amounts recorded for such matters.
2010 Financials 27