ADT 2010 Annual Report Download - page 208

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Guarantees (Continued)
as of September 24, 2010. The liability was $554 million as of September 25, 2009, which was recorded
in other liabilities on the Company’s Consolidated Balance Sheet. During the fourth quarter of 2010,
the Company reclassified $156 million from other liabilities to accrued and other current liabilities as it
expects to make a payment within the next twelve months to Covidien and Tyco Electronics related to
resolution of certain IRS audit matters. The guarantees primarily relate to certain contingent tax
liabilities included in the Tax Sharing Agreement. See Note 6.
In addition, Tyco historically provided support in the form of financial and/or performance
guarantees to various Covidien and Tyco Electronics operating entities. In connection with the
Separation, the Company worked with the guarantee counterparties to cancel or assign these
guarantees to Covidien or Tyco Electronics. To the extent these guarantees were not assigned prior to
the Separation date, Tyco assumed primary liability on any remaining such support. The Company’s
obligations were $4 million, which were included in other liabilities on the Company’s Consolidated
Balance Sheets as of September 24, 2010 and September 25, 2009, respectively, with an offset to
shareholders’ equity on the Separation date.
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 14.
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.
As of September 24, 2010, the Company had total outstanding letters of credit and bank
guarantees of approximately $740 million.
The Company records estimated product warranty costs at the time of sale. For further
information on estimated product warranty, see Note 1.
The changes in the carrying amount of the Company’s warranty accrual from September 25, 2009
to September 24, 2010 were as follows ($ in millions):
Balance as of September 25, 2009 ....................................... $79
Warranties issued ................................................... 33
Changes in estimates ................................................. (13)
Settlements ........................................................ (41)
Currency translation ................................................. (1)
Balance as of September 24, 2010 ....................................... $57
Warranty accruals for businesses that have met the held for sale criteria are included in liabilities
held for sale on the Consolidated Balance Sheets and excluded from the table above. See Note 2.
120 2010 Financials