ADT 2013 Annual Report Download - page 150

FORM 10-K
In conjunction with the Separation, substantially all of Tyco’s outstanding equity awards were converted into like-
kind awards of ADT, Tyco and Pentair. Pursuant to the terms of the 2012 Separation and Distribution Agreement, each
of the three companies is responsible for issuing its own shares upon employee exercises of stock option awards or
vesting of restricted stock units. However, the 2012 Tax Sharing Agreement provides that any allowable compensation
tax deduction for such awards is to be claimed by the employee’s current employer. The 2012 Tax Sharing Agreement
requires the employer claiming a tax deduction for shares issued by the other companies to pay a percentage of the
allowable tax deduction to the company issuing the equity. As a result, during the year ended September 27, 2013, the
Company recorded a net receivable of $23 million due from Tyco and Pentair, the offset of which is reflected as other
income in the Company’s Consolidated and Combined Statement of Operations.
7. Commitments and Contingencies
Lease Obligations
The Company has facility, vehicle and equipment leases that expire at various dates through 2024. Rental
expense under these leases was $50 million, $44 million and $38 million for fiscal years 2013, 2012 and 2011,
respectively. In fiscal year 2013, rental expense is offset by sublease income of $13 million related to certain of
the Company’s operating leases. Sublease income was immaterial in fiscal years 2012 and 2011. In addition to
operating leases, the Company has commitments under capital leases for certain facilities. See Note 5 for further
information on capital lease obligations.
The following table provides a schedule of minimum lease payments for non-cancelable operating leases as
of September 27, 2013 ($ in millions):
Fiscal 2014 .......................................... $ 58
Fiscal 2015 .......................................... 46
Fiscal 2016 .......................................... 34
Fiscal 2017 .......................................... 26
Fiscal 2018 .......................................... 21
Thereafter ........................................... 56
241
Less sublease income .................................. 25
Total ............................................... $216
Purchase Obligations
As of September 27, 2013, the Company had obligations related to commitments to purchase certain goods
and services of $23 million for fiscal year 2014 and $9 million for fiscal year 2015.
Legal Proceedings
The Company is subject to various claims and lawsuits in the ordinary course of business, including from
time to time, contractual disputes, product and general liability claims, claims that the Company has infringed the
intellectual property rights of others, and claims related to alleged security system failures. The Company has
recorded accruals for losses that it believes are probable to occur and are reasonably estimable. While the
ultimate outcome of these matters cannot be predicted with certainty, the Company believes that the resolution of
any such proceedings (other than matters specifically identified below), will not have a material effect on its
financial condition, results of operations or cash flows.
Broadview Security Contingency
On May 14, 2010, the Company acquired Broadview Security, a business formerly owned by The Brink’s
Company. Under the Coal Industry Retiree Health Benefit Act of 1992, as amended (the “Coal Act”), The
Brink’s Company and its majority-owned subsidiaries at July 20, 1992 (including certain legal entities acquired
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