ADT 2010 Annual Report Download - page 219

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Commitments and Contingencies (Continued)
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.
Income Tax Matter—See Note 6 for a more detailed discussion of the status of the Company’s
outstanding income tax audits.
15. Retirement Plans
The Company sponsors a number of pension plans. The Company measures its pension plans as of
its fiscal year end. The following disclosures exclude the impact of plans which are immaterial
individually and in the aggregate.
Defined Benefit Pension Plans—The Company has a number of noncontributory and contributory
defined benefit retirement plans covering certain of its U.S. and non-U.S. employees, designed in
accordance with conditions and practices in the countries concerned. Net periodic pension benefit cost
is based on periodic actuarial valuations which use the projected unit credit method of calculation and
is charged to the Consolidated Statements of Operations on a systematic basis over the expected
average remaining service lives of current participants. Contribution amounts are determined based on
local regulations and the advice of professionally qualified actuaries in the countries concerned. The
benefits under the defined benefit plans are based on various factors, such as years of service and
compensation.
2010 Financials 131