ADT 2013 Annual Report Download - page 151

FORM 10-K
in the Broadview Security acquisition) are jointly and severally liable with certain of The Brink’s Company’s
other current and former subsidiaries for health care coverage obligations provided for by the Coal Act. A
Voluntary Employees’ Beneficiary Associate (“VEBA”) trust has been established by The Brink’s Company to
pay for these liabilities, although the trust may have insufficient funds to satisfy all future obligations. At the
time of its spin-off from The Brink’s Company, Broadview Security entered into an agreement in which The
Brink’s Company agreed to indemnify it for any and all liabilities and expenses related to The Brink’s
Company’s former coal operations, including any health care coverage obligations. The Brink’s Company has
agreed that this indemnification survives the Company’s acquisition of Broadview Security. The Company has
evaluated its potential liability under the Coal Act as a contingency in light of all known facts, including the
funding of the VEBA, and indemnification provided by The Brink’s Company. The Company has concluded that
no accrual is necessary due to the existence of the indemnification and its belief that The Brink’s Company and
VEBA will be able to satisfy all future obligations under the Coal Act.
Telephone Consumer Protection Act
The Company was named as a defendant in two putative class actions that were filed on behalf of purported
classes of persons who claim to have received unsolicited “robocalls” in contravention of the U.S. Telephone
Consumer Protection Act (“TCPA”). These lawsuits were brought by plaintiffs seeking class action status and
monetary damages on behalf of all plaintiffs who allegedly received such unsolicited calls, claiming that millions
of calls were made by third party entities on the Company’s behalf. The Company asserts that such entities were
not retained by, nor authorized to make calls on behalf of, the Company. During fiscal year 2012, the Company
entered into an agreement to settle this litigation and increased its legal reserve by $15 million. On June 21, 2013,
the District Court approved the settlement and entered a Final Order of Judgment and Dismissal. Final payment
was made in the fourth fiscal quarter of 2013.
Environmental Matter
On October 25, 2013, the Company was notified by subpoena that the Office of the Attorney General of
California, in conjunction with the Alameda County District Attorney, is investigating whether certain of the
Company’s waste disposal policies, procedures and practices are in violation of the California Business and
Professions Code and the California Health and Safety Code. The Company is currently unable to predict the
outcome of this investigation or reasonably estimate a range of possible loss.
Income Tax Matters
As discussed above in Note 6, the 2012 Tax Sharing Agreement governs the rights and obligations of ADT,
Tyco and Pentair for certain pre-Separation tax liabilities. The Company is responsible for all of its own taxes
that are not shared pursuant to the 2012 Tax Sharing Agreement’s sharing formulae. Tyco and Pentair are
responsible for their tax liabilities that are not subject to the 2012 Tax Sharing Agreement’s sharing formulae.
With respect to years prior to and including the 2007 separation of Covidien and TE Connectivity by Tyco,
tax authorities have raised issues and proposed tax adjustments that are generally subject to the sharing
provisions of the 2007 Tax Sharing Agreement and which may require Tyco to make a payment to a taxing
authority, Covidien or TE Connectivity. Although Tyco has advised ADT that it has resolved a substantial
number of these adjustments, a few significant items raised by the IRS remain open with respect to the audit of
the 1997 through 2004 tax years. On July 1, 2013, Tyco announced that the IRS issued Notices of Deficiency to
Tyco primarily related to the treatment of certain intercompany debt transactions (the “Tyco IRS
Notices”). These notices assert that additional taxes of $883 million plus penalties of $154 million are owed
based on audits of the 1997 through 2000 tax years of Tyco and its subsidiaries, as they existed at that time.
Further, Tyco reported receiving Final Partnership Administrative Adjustments (the “Partnership Notices”) for
certain U.S. partnerships owned by its former U.S. subsidiaries, for which Tyco estimates an additional tax
deficiency of approximately $30 million will be asserted. The additional tax assessments related to the Tyco IRS
87