ADT 2009 Annual Report Download - page 229

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Commitments and Contingencies (Continued)
charge to selling, general and administrative expenses for its share of the settlement of approximately
$30 million.
Through the second quarter of fiscal 2009, the Company settled additional legacy legal matters,
including several of the lawsuits filed by plaintiffs that had opted out of the June 2007 class action
settlement for an aggregate amount of approximately $90 million. Pursuant to the Separation and
Distribution Agreement, the Company’s share of these settlement amounts was approximately
$24 million, with Covidien and Tyco Electronics responsible for approximately $38 million and
$28 million, respectively. The Company recorded the total settlement amount of $90 million as a
liability within the Company’s Consolidated Balance Sheet as of March 27, 2009, and recorded
receivables due from Covidien and Tyco Electronics for their respective portions of the liability in other
current assets in the Company’s Consolidated Balance Sheet as of March 27, 2009. As a result, the
Company recorded $24 million in charges to its Consolidated Statements of Operations during 2009.
During the second quarter of 2009, the Company concluded that its best estimate of probable loss
for the legacy securities matters outstanding at the time was $375 million in the aggregate, which the
Company recorded as a liability in accrued and other current liabilities in the Consolidated Balance
Sheet as of March 27, 2009. Due to the sharing provisions in the Separation and Distribution
Agreement, the Company also recorded receivables from Covidien and Tyco Electronics in the amounts
of $158 million and $116 million, respectively, which were recorded in other current assets in the
Company’s Consolidated Balance Sheet as of March 27, 2009. As a result, the Company recorded a net
charge of $101 million related to legacy securities matters during the quarter ended March 27, 2009 in
selling, general, and administrative expenses in the Consolidated Statements of Operations.
In the second half of fiscal 2009, the Company agreed to settle with all of the remaining plaintiffs
that had opted-out of the class action settlement as well as plaintiffs who had brought ERISA related
claims for a total of $271 million. Pursuant to the Separation and Distribution Agreement, the
Company’s share of the settlement amount was approximately $73 million, with Covidien and Tyco
Electronics responsible for approximately $114 million and $84 million, respectively. This settlement
activity did not result in the Company recording a charge to its Consolidated Statements of Operations
as the Company had established a reserve for its best estimate of the amount of loss during the second
quarter of 2009 as discussed above. The Company continues to believe that the accrual remaining as of
September 25, 2009 is its best estimate for the remaining unresolved claims. Although the Company
has reserved its best estimate of probable loss, related to unresolved legacy securities claims, their
ultimate resolution could differ from the estimate and could have a material adverse effect on the
Company’s financial position, results of operations or cash flows.
Under the terms of the Separation and Distribution Agreement, each of Tyco, Covidien and Tyco
Electronics are jointly and severally liable for the full amount of any legacy securities matters
(excluding the counter-claims brought by former executives and a director described above).
Environmental Matters
Tyco is involved in various stages of investigation and cleanup related to known environmental
remediation matters at a number of sites. The ultimate cost of site cleanup is difficult to predict given
the uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws and
regulations and alternative cleanup methods. As of September 25, 2009, Tyco concluded that it was
probable that it would incur remedial costs in the range of approximately $31 million to $85 million. As
2009 Financials 137