ADT 2014 Annual Report Download - page 153

FORM 10-K
The 2012 Tax Sharing Agreement also provides that, if any party defaults in its obligation to another party
to pay its share of the distribution taxes that arise as a result of no party’s fault, each non-defaulting party is
required to pay, equally with any other non-defaulting party, the amounts in default. In addition, if another party
to the 2012 Tax Sharing Agreement that is responsible for all or a portion of an income tax liability defaults in its
payment of such liability to a taxing authority, ADT could be legally liable under applicable tax law for such
liabilities and required to make additional tax payments. Accordingly, under certain circumstances, ADT may be
obligated to pay amounts in excess of its agreed-upon share of its, Tyco’s and Pentair’s tax liabilities.
The Company recorded a receivable from Tyco for certain tax liabilities incurred by ADT but indemnified
by Tyco under the 2012 Tax Sharing Agreement. This receivable totaled $41 million as of September 27, 2013,
substantially all of which was released into other expense during fiscal year 2014. The actual amount that the
Company may be entitled to receive could vary depending upon the outcome of certain unresolved tax matters,
which may not be resolved for several years.
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. During the year
ended September 26, 2014, amounts recorded in connection with this arrangement were immaterial.
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 $58 million, $50 million and $44 million for fiscal years 2014, 2013 and 2012,
respectively. Sublease income was immaterial for all years presented. In addition to operating leases, the
Company has commitments under capital leases for certain facilities, which are immaterial.
The following table provides a schedule of minimum lease payments for non-cancelable operating leases as
of September 26, 2014 ($ in millions):
Fiscal 2015 .......................................... $ 65
Fiscal 2016 .......................................... 52
Fiscal 2017 .......................................... 39
Fiscal 2018 .......................................... 33
Fiscal 2019 .......................................... 21
Thereafter ........................................... 45
255
Less sublease income .................................. 18
Total ............................................... $237
87