ADT 2011 Annual Report Download - page 293

TYCO INTERNATIONAL LTD.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2011
(Continued)
4. COMMITMENTS AND CONTINGENCIES (Continued)
progress reports to these 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 conduct identified by the
Company in the course of its ongoing compliance activities. The baseline review, which has been
completed, 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, which remain ongoing. Although the Company has recorded its best estimate of
potential loss related to this matter, it is possible that this estimate may differ from the ultimate loss
determined in connection with the resolution of this matter, as 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 may have a material adverse effect on the
Company’s financial position, results of operations or cash flows.
Covidien and TE Connectivity agreed, in connection with the 2007 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 investigation matters 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 and TE Connectivity, 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 TE Connectivity.
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. 2012 SEPARATION TRANSACTION
On September 19, 2011, the Company announced that its Board of Directors approved a plan to
separate the Company into three separate, publicly traded companies consisting of the Company’s
North American residential security business, its flow control business, and its commercial fire and
security business. The 2012 separation is expected to be completed by the end of the third calendar
quarter of 2012 through a tax-free pro rata distribution of all of the equity interest in the flow control
and North American residential security business.
Completion of the proposed separation is subject to certain conditions, including final approval by
the Tyco Board of Directors and shareholders, receipt of tax opinions and rulings and the filing and
effectiveness of registration statements with the SEC. The separation will also be subject to the
completion of any necessary financing.
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