ADT 2012 Annual Report Download - page 177

To the extent ADT is responsible for any liability under the 2012 Tax Sharing Agreement, there could be a
material impact on its financial position, results of operations, cash flows or its effective tax rate in future
reporting periods.
Other liabilities in the Company’s Consolidated and Combined Balance Sheet as of September 28, 2012
include $19 million for the fair value of ADT’s obligations under certain tax related agreements entered into in
conjunction with the Separation. The maximum amount of potential future payments is not determinable as they
relate to unknown conditions and future events that cannot be predicted.
8. Guarantees
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 28, 2012, the Company had no outstanding letters of credit; however, letters of credit may
be issued in the future in connection with routine business requirements.
9. Related Party Transactions
Transaction with Directors—Certain members of the Company’s board of directors also served on Tyco’s
board of directors prior to the Separation. Transactions with Tyco during fiscal years 2012, 2011 and 2010 are
described below. Additionally, during fiscal 2012, 2011 and 2010, the Company engaged in commercial
transactions in the normal course of business with companies where Directors of ADT or Tyco were employed
and served as officers. During each of these periods, the Company’s purchases from such companies aggregated
less than 1 percent of combined revenue.
Cash Management—Prior to the Separation, the Company’s cash was regularly “swept” by Tyco at its
discretion in conjunction with its centralized approach to cash management and financing of operations.
Transfers of cash both to and from Tyco are included within parent company investment on the Consolidated and
Combined Statements of Stockholders’ Equity. The main components of transfers to and from Tyco are related to
cash pooling and general financing activities as well as cash transfers for acquisitions, investments and various
allocations from Tyco.
Trade Activity—Accounts payable includes $14 million and $9 million of payables to Tyco affiliates as of
September 28, 2012 and September 30, 2011, respectively, primarily related to the purchase of inventory. During
fiscal 2012, 2011 and 2010, the Company purchased inventory from Tyco affiliates in the amount of $110
million, $79 million and $34 million, respectively.
Service and Lending Arrangement with Tyco Affiliates—Prior to the Separation, the Company had various
debt and cash pool agreements with Tyco affiliates, which were executed outside of the normal Tyco centralized
approach to cash management and financing of operations. Other liabilities as of September 30, 2011 includes
$63 million of payables to Tyco affiliates related to these types of transactions.
Also, prior to the Separation, the Company, Tyco and its affiliates paid for expenses on behalf of each other.
Prepaid expenses and other current assets includes $7 million of receivables from Tyco and its affiliates as of
September 30, 2011. Accrued and other current liabilities includes $2 million of payables to Tyco and its
affiliates as of September 30, 2011.
Debt and Related Items—For periods prior to the Separation, the Company was allocated a portion of
Tyco’s consolidated debt and interest expense. Note 5 provides further information regarding these allocations.
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