ADT 2015 Annual Report Download - page 104

FORM 10-K
• changes in regulatory policy or interpretation;
• changes in the ratings of our debt or stock by rating agencies or securities analysts; or
• announcements of developments affecting our business.
The stock markets have experienced price and volume fluctuations that have affected our stock price and the
market prices of equity securities of many other companies. These broad market and industry fluctuations, as
well as general, economic, political and market conditions, may negatively affect the market price of our
common stock. Accordingly, investors in our common stock may not be able to resell their shares at or above
their original purchase price.
Risks Relating to our Separation from Tyco
We share responsibility for certain income tax liabilities of ADT, Tyco and Pentair Ltd., formerly Tyco
Flow Control International Ltd. (“Pentair”) for tax periods prior to and including September 28, 2012,
and such liabilities may include a portion of Tyco’s obligations under its tax sharing agreement with
Covidien Ltd. (“Covidien”) and TE Connectivity Ltd. (“TE Connectivity”) for tax liabilities for tax
periods prior to and including June 29, 2007.
In connection with the 2007 distributions of Covidien and TE Connectivity by Tyco (the “2007
Separation”), Tyco entered into a tax sharing agreement (the “2007 Tax Sharing Agreement”) that governs the
rights and obligations of each party with respect to certain pre-2007 Separation tax liabilities and certain tax
liabilities arising in connection with the 2007 Separation. More specifically, Tyco, Covidien and TE Connectivity
share 27%, 42% and 31%, respectively, of income tax liabilities that arise from adjustments made by tax
authorities to Tyco’s, Covidien’s and TE Connectivity’s U.S. and certain non-U.S. income tax returns and certain
taxes attributable to internal transactions undertaken in anticipation of the 2007 Separation. In addition, in the
event the 2007 Separation or certain related transactions is determined to be taxable as a result of actions taken
after the 2007 Separation by Tyco, Covidien or TE Connectivity, the party responsible for such failure would be
responsible for all taxes imposed on Tyco, Covidien or TE Connectivity as a result thereof. If none of the
companies is responsible for such failure, then Tyco, Covidien and TE Connectivity would be responsible for
such taxes, in the same manner and in the same proportions as other shared tax liabilities under the 2007 Tax
Sharing Agreement. Costs and expenses associated with the management of these shared tax liabilities are
generally shared equally among the parties.
In connection with the Separation from Tyco, we entered into a tax sharing agreement (the “2012 Tax
Sharing Agreement”) with Tyco and Pentair that governs the rights and obligations of ADT, Tyco and Pentair for
certain pre-Separation tax liabilities, including Tyco’s obligations under the 2007 Tax Sharing Agreement. The
2012 Tax Sharing Agreement provides that ADT, Tyco and Pentair will share (i) certain pre-Separation income
tax liabilities that arise from adjustments made by tax authorities to ADT’s, Tyco’s, and Pentair’s U.S. and
certain non-U.S. income tax returns, and (ii) payments required to be made by Tyco in respect to the 2007 Tax
Sharing Agreement (collectively, “Shared Tax Liabilities”). Tyco will be responsible for the first $500 million of
Shared Tax Liabilities. ADT and Pentair will share 58% and 42%, respectively, of the next $225 million of
Shared Tax Liabilities. ADT, Tyco and Pentair will share 27.5%, 52.5% and 20.0%, respectively, of Shared Tax
Liabilities above $725 million.
With respect to years prior to and including the 2007 Separation, 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 us that it has resolved a substantial number of these adjustments, a few significant items raised
by the IRS remain open with respect to the audits of the 1997 through 2007 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
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