▪ | The Company is responsible for the adequacy and accuracy of the disclosure in the filings; |
▪ | Staff comments or changes to disclosures in response to Staff comments do not foreclose the Commission from taking any action with respect to the filings; and |
▪ | The Company may not assert Staff comments as a defense in any proceedings initiated by the Commission or any person under the federal securities laws of the United States. |
1. | Please revise as follows: |
• | Include a line item for the gross amount of the non-cash charge which increased your total gross asbestos liabilities per the schedule on page 106. This amounted to $550 million in fiscal 2014. |
• | Clarify the nature of “transfer from discontinued operations” in Note 3. |
Summary of Cash Flows from Discontinued Operations | 2014 |
Operating activities (A) | $ 81 |
Investing activities (B) | 1,789 |
Cash provided by discontinued operations before transfer to continuing operations | $ 1,870 |
Financing activities (C) | $ (1,870) |
Financing activities - Continuing Operations | |
Transfer from discontinued operations | $ 1,870 |
___________________ | |
(A) Operating activities represents cash from ADT Korea operations | |
(B) Investing activities is composed of: | |
Cash received on sale of ADT Korea | $ 1,865 |
Capital expenditures by ADT Korea | (76) |
Total | $ 1,789 |
(C) Financing activities represents cash swept from ADT Korea which was generated from the business’ operating and investing activities and subsequently transferred to the Company’s centralized cash management subsidiaries |
2. | As disclosed, you recognized a gain of $1.0 billion, net of a $212 million charge related to the “indemnification at fair value for certain tax related matters borne by the buyer that are probable of being paid.” Please tell us your basis for recognizing a gain based on the probability of the indemnification event, what your underlying estimates are concerning this indemnification, when and how you expect the indemnification to occur, and whether some portion of the indemnification relates to your tax deficiency per your disclosure on page 94, and if so, if you had already accrued the corresponding liability. |
(a) | 20% of the gain on disposition determined as gross cash proceeds less book basis less cost to sell; or |
(b) | 11% of the gross cash proceeds |
1 Pursuant to the stock purchase agreement, the parties were required to file relevant exemption applications in respect of the capital gains tax in the month immediately following the closing. |
3. | We note your tax benefit from non-U.S. net earnings as depicted in the tax reconciliation table. Please discuss and disclose in your MD&A the identities of specific jurisdictions that materially affect your effective tax rate (currently, 3.9%), the tax rates and incentives in those specific jurisdictions, earnings within those jurisdictions and information above the effects of such foreign jurisdictions (e.g., magnitude, mix), including but not limited to Ireland, on the current and future effective tax rate. |
4. | Per your disclosure, on January 9, 2015, the Company completed a series of restructuring transactions related to the establishment and funding of a dedicated structure pursuant to which the Company acquired the assets of Grinnell and transferred cash and other assets totaling approximately $278 million (not including $22 million received by the QSF from historic third-party insurers in settlement of coverage disputes) to the structure. Please clarify whether or not you intend to consolidate such qualified service fund or special purpose entity. Refer to your basis in the accounting literature. |
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