ADT 2010 Annual Report Download - page 272

TYCO INTERNATIONAL LTD.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 24, 2010
(Continued)
4. COMMITMENTS AND CONTINGENCIES (Continued)
agencies. The Company has and will continue to communicate with the DOJ and SEC to provide
updates on the baseline review and follow-up investigations, including, as appropriate, briefings
concerning additional instances of potential improper payments identified by the Company in the
course of its ongoing compliance activities. The baseline review revealed that some business practices
may not comply with Tyco and FCPA requirements, and in February 2010, the Company initiated
discussions with the DOJ and SEC aimed at resolving these matters. Active discussions remain ongoing
and the Company cannot predict the timing of their resolution or their outcome and cannot estimate
the range of potential loss or the form of penalty that may result from an adverse resolution. It is
possible that the Company may be required to pay material fines, consent to injunctions on future
conduct, consent to the imposition of a compliance monitor, or suffer other criminal or civil penalties
or adverse impacts, including being subject to lawsuits brought by private litigants, each of which could
have a material adverse effect on the Company’s financial position, results of operations or cash flows.
Covidien and Tyco Electronics agreed, in connection with the separation, to cooperate with the
Company in its responses regarding these matters. Any judgment required to be paid or settlement or
other cost incurred by the Company in connection with the FCPA investigations would be subject to the
liability sharing provisions of the Separation and Distribution Agreement, which assigned liabilities
primarily related to the former Healthcare and Electronics businesses of the Company to Covidien or
Tyco Electronics, respectively, and provides that the Company will retain liabilities primarily related to
its continuing operations. Any liabilities not primarily related to a particular segment will be shared
equally among the Company, Covidien and Tyco Electronics.
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.
5. DIVESTITURES
During 2010, the Board of Directors approved a plan to pursue a tax-free spin-off of Tyco’s
Electrical and Metal Products business. On November 9, 2010, the Company announced an agreement
to sell a 51% interest in its Electrical and Metal Products business. In connection with this
announcement, the Company no longer plans to pursue the tax-free spin-off of the Electrical and Metal
Products business as proposed on April 27, 2010. See Note 14.
6. ACQUISITIONS
On May 14, 2010, the Company’s ADT Worldwide segment acquired all of the outstanding equity
of Brink’s Home Security Holdings, Inc (‘‘BHS’’ or ‘‘Broadview Security’’), a publicly traded company
that was formerly owned by The Brink’s Company, in a cash-and-stock transaction valued at
approximately $2.0 billion. To complete this transaction, the cash was paid by a subsidiary of the
Company and the stock was paid by the Company and a subsidiary that holds shares in the Company.
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