UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________
FORM 10-Q
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 26, 2015
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
333-196049
(Commission File Number)
___________________________________________________________
TYCO INTERNATIONAL PLC
(Exact name of Registrant as specified in its charter)
Ireland
(Jurisdiction of Incorporation)
 
98-0390500
(I.R.S. Employer Identification Number)
Unit 1202 Building 1000 City Gate
Mahon, Cork Ireland
(Address of registrant's principal executive office)
353-21-423-5000
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ý    No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes ý    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ý
 
Accelerated filer o
 
Non-accelerated filer o
 (Do not check if a smaller
reporting company)
 
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes o    No ý
The number of ordinary shares outstanding as of July 24, 2015 was 421,516,093.
 


TYCO INTERNATIONAL PLC
INDEX TO FORM 10-Q

 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2

PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
  TYCO INTERNATIONAL PLC
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in millions, except per share data)
 
For the Quarters Ended
 
For the Nine Months Ended
 
June 26,
2015
 
June 27,
2014
 
June 26,
2015
 
June 27,
2014
Revenue from product sales
$
1,511

 
$
1,620

 
$
4,457

 
$
4,550

Service revenue
978

 
1,040

 
2,940

 
3,079

Net revenue
2,489

 
2,660

 
7,397

 
7,629

Cost of product sales
1,025

 
1,104

 
3,046

 
3,105

Cost of services
548

 
571

 
1,645

 
1,721

Selling, general and administrative expenses
625

 
671

 
1,925

 
1,876

Separation costs (see Note 2)
—

 
—

 
—

 
1

Restructuring and asset impairment charges, net (see Note 4)
38

 
17

 
108

 
27

Operating income
253

 
297

 
673

 
899

Interest income
4

 
4

 
11

 
10

Interest expense
(26
)
 
(24
)
 
(75
)
 
(73
)
Other income (expense), net
6

 
—

 
9

 
(2
)
Income from continuing operations before income taxes
237

 
277

 
618

 
834

Income tax expense
(49
)
 
(55
)
 
(86
)
 
(164
)
Equity income in earnings of unconsolidated subsidiaries
—

 
215

 
—

 
206

Income from continuing operations
188

 
437

 
532

 
876

(Loss) income from discontinued operations, net of income taxes
(32
)
 
1,015

 
(50
)
 
1,055

Net income
156

 
1,452

 
482

 
1,931

Less: noncontrolling interest in subsidiaries net income (loss)
—

 
2

 
(3
)
 
4

Net income attributable to Tyco ordinary shareholders
$
156

 
$
1,450

 
$
485

 
$
1,927

Amounts attributable to Tyco ordinary shareholders:
 

 
 

 
 

 
 

Income from continuing operations
$
188

 
$
435

 
$
535

 
$
872

(Loss) income from discontinued operations
(32
)
 
1,015

 
(50
)
 
1,055

Net income attributable to Tyco ordinary shareholders
$
156

 
$
1,450

 
$
485

 
$
1,927

Basic earnings per share attributable to Tyco ordinary shareholders:
 

 
 

 
 

 
 

Income from continuing operations
$
0.45

 
$
0.95

 
$
1.27

 
$
1.89

(Loss) income from discontinued operations
(0.08
)
 
2.22

 
(0.12
)
 
2.29

Net income attributable to Tyco ordinary shareholders
$
0.37

 
$
3.17

 
$
1.15

 
$
4.18

Diluted earnings per share attributable to Tyco ordinary shareholders:
 

 
 

 
 

 
 

Income from continuing operations
$
0.44

 
$
0.93

 
$
1.25

 
$
1.86

(Loss) income from discontinued operations
(0.07
)
 
2.18

 
(0.11
)
 
2.25

Net income attributable to Tyco ordinary shareholders
$
0.37

 
$
3.11

 
$
1.14

 
$
4.11

Weighted average number of shares outstanding:
 

 
 

 
 

 
 

Basic
421

 
458

 
421

 
461

Diluted
427

 
466

 
427

 
469

   

See Notes to Unaudited Consolidated Financial Statements.

3

TYCO INTERNATIONAL PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(in millions)
 
For the Quarters Ended
 
For the Nine Months Ended
 
June 26,
2015
 
June 27,
2014
 
June 26,
2015
 
June 27,
2014
Net income
$
156

 
$
1,452

 
$
482

 
$
1,931

Other comprehensive income (loss), net of tax
 
 
 
 

 

Foreign currency translation
28

 
28

 
(346
)
 
(24
)
Defined benefit and post retirement plans
4

 
9

 
13

 
16

Unrealized loss on marketable securities and derivative instruments, net of tax
(4
)
 
—

 
(4
)
 
—

Total other comprehensive income (loss), net of tax
28

 
37

 
(337
)
 
(8
)
Comprehensive income
184

 
1,489

 
145

 
1,923

Less: comprehensive income (loss) attributable to noncontrolling interests
—

 
2

 
(3
)
 
4

Comprehensive income attributable to Tyco ordinary shareholders
$
184

 
$
1,487

 
$
148

 
$
1,919

   See Notes to Unaudited Consolidated Financial Statements.

4

TYCO INTERNATIONAL PLC
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in millions, except per share data)
 
June 26,
2015
 
September 26,
2014
Assets
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
531

 
$
892

Accounts receivable, less allowance for doubtful accounts of $70 and $67, respectively
1,775

 
1,734

Inventories
690

 
625

Prepaid expenses and other current assets
820

 
1,051

Deferred income taxes
304

 
304

Assets held for sale
13

 
180

Total Current Assets
4,133

 
4,786

Property, plant and equipment, net
1,215

 
1,262

Goodwill
4,291

 
4,122

Intangible assets, net
890

 
712

Other assets
1,191

 
927

Total Assets
$
11,720

 
$
11,809

Liabilities and Equity
 
 
 
Current Liabilities:
 
 
 
Loans payable and current maturities of long-term debt
$
277

 
$
20

Accounts payable
744

 
825

Accrued and other current liabilities
1,996

 
2,114

Deferred revenue
403

 
400

Liabilities held for sale
6

 
118

Total Current Liabilities
3,426

 
3,477

Long-term debt
1,744

 
1,443

Deferred revenue
313

 
335

Other liabilities
1,898

 
1,871

Total Liabilities
7,381

 
7,126

Commitments and Contingencies (see Note 11)


 

Redeemable noncontrolling interest in businesses held for sale
—

 
13

Tyco Shareholders' Equity:
 
 
 
Ordinary shares, $0.01 and CHF 0.50 par value, 1,000,000,000 and 825,222,070 shares authorized, and 421,432,902 and 486,363,050 shares issued as of June 26, 2015 and September 26, 2014, respectively
4

 
208

Preference shares $0.01 par value, 100,000,000 shares authorized, none outstanding as of June 26, 2015
—


—

Ordinary shares held in treasury, nil and 59,460,486 shares as of June 26, 2015 and September 26, 2014, respectively
—

 
(2,515
)
Additional paid in capital
504

 
3,306

Accumulated earnings
5,358

 
4,873

Accumulated other comprehensive loss
(1,562
)
 
(1,225
)
Total Tyco Shareholders' Equity
4,304

 
4,647

Nonredeemable noncontrolling interest
35

 
23

Total Equity
4,339

 
4,670

Total Liabilities, Redeemable Noncontrolling Interest and Equity
$
11,720

 
$
11,809

See Notes to Unaudited Consolidated Financial Statements.

5

TYCO INTERNATIONAL PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in millions)
 
For the Nine Months Ended
 
June 26,
2015
 
June 27,
2014
Cash Flows From Operating Activities:
 
 
 
Net income attributable to Tyco ordinary shareholders
$
485

 
$
1,927

Noncontrolling interest in subsidiaries net (loss) income
(3
)
 
4

Income (loss) from discontinued operations, net of income taxes
50

 
(1,055
)
Income from continuing operations
532

 
876

Adjustments to reconcile net cash provided by operating activities:
 
 
 
Depreciation and amortization
257

 
268

Non-cash compensation expense
44

 
48

Deferred income taxes
(1
)
 
85

Provision for losses on accounts receivable and inventory
37

 
32

Legacy legal matters (see Note 11)
—

 
(92
)
Gain on investments
(15
)
 
(214
)
Other non-cash items
29

 
18

Changes in assets and liabilities, net of the effects of acquisitions and divestitures:
 
 
 
Accounts receivable, net
(104
)
 
(41
)
Contracts in progress
8

 
(50
)
Inventories
(72
)
 
(14
)
Prepaid expenses and other assets
(25
)
 
(39
)
Accounts payable
(78
)
 
16

Accrued and other liabilities
(50
)
 
(361
)
Deferred revenue
(6
)
 
(12
)
Other
(45
)
 
(2
)
Net cash provided by operating activities
511

 
518

Net cash (used in) provided by discontinued operating activities
(1
)
 
102

Cash Flows From Investing Activities:
 
 
 
Capital expenditures
(183
)
 
(210
)
Proceeds from disposal of assets
4

 
7

Acquisition of businesses, net of cash acquired
(525
)
 
(63
)
Acquisition of dealer generated customer accounts and bulk account purchases
(13
)
 
(20
)
Divestiture of business, net of cash divested
(1
)
 
—

Sales and maturities of investments
283

 
283

Purchases of investments
(290
)
 
(332
)
Sale of equity investment
—

 
250

(Increase) decrease in restricted cash
(27
)
 
1

Other
—

 
1

Net cash used in investing activities
(752
)
 
(83
)
Net cash (used in) provided by discontinued investing activities
(37
)
 
1,789

Cash Flows From Financing Activities:
 
 
 
Proceeds from issuance of short-term debt
258

 
830

Repayment of short-term debt
(259
)
 
(831
)
Proceeds from issuance of long-term debt
570

 
—

Proceeds from exercise of share options
70

 
79

Dividends paid
(237
)
 
(231
)
Repurchase of ordinary shares
(417
)
 
(806
)
Transfer (to) from discontinued operations
(38
)
 
1,891

Payment of contingent consideration
(23
)
 
—

Other
(26
)
 
(10
)
Net cash (used in) provided by financing activities
(102
)
 
922

Net cash provided by (used in) discontinued financing activities
38

 
(1,891
)
Effect of currency translation on cash
(18
)
 
(8
)
Net (decrease) increase in cash and cash equivalents
(361
)
 
1,349

Cash and cash equivalents at beginning of period
892

 
563

Cash and cash equivalents at end of period
$
531

 
$
1,912

See Notes to Unaudited Consolidated Financial Statements.

6

TYCO INTERNATIONAL PLC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
For the Nine Months Ended June 26, 2015 and June 27, 2014
(in millions)
 
Number of
Ordinary
Shares
 
Ordinary
Shares at
Par Value
 
Treasury
Shares
 
Additional Paid in Capital
 
Accumulated
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Total Tyco
Shareholders'
Equity
 
Nonredeemable
Noncontrolling
Interest
 
Total
Equity
Balance as of September 27, 2013
463

 
$
208

 
$
(912
)
 
$
3,754

 
$
3,035

 
$
(987
)
 
$
5,098

 
$
23

 
$
5,121

Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to Tyco ordinary shareholders
 
 
 
 
 
 
 
 
1,927

 
 
 
1,927

 
3

 
1,930

Other comprehensive loss, net of tax
 
 
 
 
 
 
 
 
 
 
(8
)
 
(8
)
 
 
 
(8
)
Dividends declared
 
 
 
 
 
 
(325
)
 
 
 
 
 
(325
)
 
 
 
(325
)
Shares issued from treasury for vesting of share based equity awards
6

 
 
 
215

 
(137
)
 
 
 
 
 
78

 
 

 
78

Repurchase of ordinary shares
(20
)
 
 
 
(806
)
 
 
 
 
 
 
 
(806
)
 
 

 
(806
)
Compensation expense
 
 
 
 
 
 
48

 
 
 
 
 
48

 
 

 
48

Other
 
 
 
 
(10
)
 
 
 
 
 
 
 
(10
)
 


 
(10
)
Balance as of June 27, 2014
449

 
$
208

 
$
(1,513
)
 
$
3,340

 
$
4,962

 
$
(995
)
 
$
6,002

 
$
26

 
$
6,028


 
Number of
Ordinary
Shares
 
Ordinary
Shares at
Par Value
 
Treasury
Shares
 
Additional Paid in Capital
 
Accumulated
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Total Tyco
Shareholders'
Equity
 
Nonredeemable
Noncontrolling
Interest
 
Total
Equity
Balance as of September 26, 2014
427

 
$
208

 
$
(2,515
)
 
$
3,306

 
$
4,873

 
$
(1,225
)
 
$
4,647

 
$
23

 
$
4,670

Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to Tyco ordinary shareholders
 
 
 
 
 
 
 
 
485

 
 
 
485

 
(3
)
 
482

Other comprehensive loss, net of tax
 
 
 
 
 
 
 
 
 
 
(337
)
 
(337
)
 
 
 
(337
)
Cancellation of treasury shares
 
 
(34
)
 
2,878

 
(2,844
)
 
 
 
 
 
—

 
 
 
—

Dividends declared
 
 
 
 
 
 
(170
)
 
 
 
 
 
(170
)
 
 

 
(170
)
Conversion of Tyco International Ltd. common shares to Tyco International plc ordinary shares
 
 
(170
)
 
 
 
170

 
 
 
 
 
—

 
 

 
—

Shares issued for vesting of share based equity awards
4

 
 
 
67

 
3

 
 
 
 
 
70

 
 

 
70

Repurchase of ordinary shares
(10
)
 
 
 
(417
)
 
 
 
 
 
 
 
(417
)
 
 

 
(417
)
Compensation expense
 
 
 
 
 
 
44

 
 
 
 
 
44

 
 

 
44

Noncontrolling interest related to acquisitions and divestitures
 
 
 
 
 
 


 
 
 
 
 
—

 
16

 
16

Other
 
 
 
 
(13
)
 
(5
)
 
 
 
 
 
(18
)
 
(1
)
 
(19
)
Balance as of June 26, 2015
421

 
$
4

 
$
—

 
$
504

 
$
5,358

 
$
(1,562
)
 
$
4,304

 
$
35

 
$
4,339

See Notes to Unaudited Consolidated Financial Statements.

7

TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



1.    Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation—The Consolidated Financial Statements included herein are unaudited, but in the opinion of management, such financial statements include all adjustments, consisting of normal recurring adjustments, necessary to summarize fairly the Company's financial position, results of operations and cash flows for the interim period. The unaudited Consolidated Financial Statements include the consolidated results of Tyco International plc, a corporation organized under the laws of Ireland, and its subsidiaries (Tyco and all its subsidiaries, hereinafter collectively referred to as the "Company" or "Tyco"). The unaudited Consolidated Financial Statements have been prepared in United States dollars ("USD") and in accordance with the instructions to Form 10-Q under the Securities and Exchange Act of 1934, as amended. The results reported in these unaudited Consolidated Financial Statements should not be taken as indicative of results that may be expected for the entire year. These financial statements should be read in conjunction with the Consolidated Financial Statements and accompanying notes contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 26, 2014 (the "2014 Form 10-K").
References to 2015 and 2014 are to Tyco's fiscal quarters ending June 26, 2015 and June 27, 2014, respectively, unless otherwise indicated. The Company has a 52- or 53-week fiscal year that ends on the last Friday in September. Fiscal years 2015 and 2014 are both 52-week years.
Change of Jurisdiction - On November 17, 2014, Tyco International Ltd., an entity organized under the laws of Switzerland ("Tyco Switzerland"), completed its change of jurisdiction of incorporation from Switzerland to Ireland by merging with its subsidiary, Tyco International plc ("Tyco Ireland"), a public limited company incorporated under the laws of Ireland (the "Merger"). As a result of the Merger, Tyco Ireland is the successor issuer to Tyco Switzerland, has succeeded to the attributes of Tyco Switzerland as the registrant under SEC regulations, and has assumed all pre-Merger obligations of Tyco Switzerland.
Reclassifications - Certain prior period amounts have been reclassified to conform with current period presentation. During the quarter ended June 26, 2015, the Company sold three businesses in the Rest of World ("ROW") Installation & Services segment. The assets and liabilities related to these businesses were classified as held for sale of as September 26, 2014, and the results of operations of two of these businesses are included in discontinued operations for all periods presented, as the criteria to be presented as a discontinued operation were not satisfied for the third business. The Company expects to complete the sale of another of its ROW Installation & Services businesses during the first half of fiscal 2016. The assets and liabilities of this business are classified as held for sale, and its results of operations are presented as discontinued operations for all periods presented. See Note 3.
Recently Adopted Accounting Pronouncements - In March 2013, the Financial Accounting Standards Board ("FASB") issued authoritative guidance to resolve diversity in practice on the accounting for the cumulative translation adjustment ("CTA") when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets within a foreign entity. The guidance requires that the parent release any CTA into net income when the parent ceases to have a controlling financial interest in a subsidiary or group of assets within a foreign entity which results in a substantially complete liquidation of the foreign entity; when the sale of an investment in a foreign entity results in the loss of a controlling financial interest; or where an acquirer obtains control of an acquiree in which it had an equity interest immediately before the acquisition date. The guidance does not change the requirement to release a pro rata portion of the CTA into net income upon a partial sale of an equity method investment that is a foreign entity. The guidance became effective for Tyco in the first quarter of fiscal 2015. The adoption of this guidance, which was applied on a prospective basis, did not have a material impact on the Company's financial position, results of operations or cash flows.
In July 2013, the FASB issued authoritative guidance for the presentation of an unrecognized tax benefit when a net operating loss (“NOL”) carryforward, a similar tax loss, or a tax credit carryforward exists. The guidance requires an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a NOL carryforward, a similar tax loss, or a tax credit carryforward. If the NOL carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the jurisdiction or the tax law of the jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit will be presented in the financial statements as a liability and will not be combined with deferred tax assets. This guidance does not require any additional recurring disclosures and became effective for Tyco during the first fiscal quarter of fiscal 2015. The adoption of this guidance, which was applied on a prospective basis, did not have a material impact on the Company's financial position, results of operations or cash flows.

8
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Recently Issued Accounting Pronouncements - In April 2014, the FASB issued authoritative guidance to change the criteria for reporting discontinued operations. Under the new guidance, only disposals representing a strategic shift in a company's operations and financial results should be reported as discontinued operations, with expanded disclosures. In addition, disclosure of the pre-tax income attributable to a disposal of a significant part of an organization that does not qualify as a discontinued operation is required. This guidance is effective for Tyco in the first quarter of fiscal 2016, with early adoption permitted only for disposals that have not been reported in financial statements previously issued or available for issuance. The Company is currently assessing the impact, if any, the guidance will have upon adoption.
In May 2014, the FASB issued authoritative guidance for revenue from contracts with customers, which provides a single comprehensive revenue recognition model to apply in determining how and when to recognize revenue. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. When applying the new revenue model to contracts with customers the guidance requires five steps to be applied, which include: 1) identify the contract(s) with a customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract and 5) recognize revenue when (or as) the entity satisfies a performance obligation. The guidance also requires both quantitative and qualitative disclosures, which are more comprehensive than existing revenue standards. The disclosures are intended to enable financial statement users to understand the nature, timing and uncertainty of revenue and the related cash flow. In July 2015, the FASB issued a deferral of the effective date of this guidance, which for Tyco will be the first quarter of fiscal 2019, with early adoption permitted beginning the first quarter of fiscal 2018. The Company is currently assessing the impact the guidance will have upon adoption.
In May 2015, the FASB issued authoritative guidance which is intended to improve the existing disclosure requirements for short-duration contracts for insurance entities that issue such contracts. The guidance requires additional information to be disclosed about the liability for unpaid claims and claim adjustment expenses to increase the transparency of significant estimates made in measuring those liabilities. This guidance is effective for Tyco in the first quarter of fiscal 2017, with early adoption permitted. The Company is currently assessing the impact, if any, the guidance will have upon adoption.
2.    2012 Separation Transaction
On September 28, 2012, the Company completed the spin-offs of The ADT Corporation ("ADT") and Pentair Ltd. (formerly known as Tyco Flow Control International Ltd. ("Tyco Flow Control")), formerly the North American residential security and flow control businesses of Tyco, respectively, into separate, publicly traded companies in the form of a distribution to Tyco shareholders ("2012 Separation").
In connection with activities taken to complete the 2012 Separation and to create the revised organizational structure of the Company, the Company incurred pre-tax charges ("Separation Charges") within continuing operations of nil and $11 million during the quarters ended June 26, 2015 and June 27, 2014, respectively, and $2 million and $42 million during the nine months ended June 26, 2015 and June 27, 2014, respectively. In addition, the Company incurred pre-tax charges within discontinued operations of nil and $1 million during the quarters ended June 26, 2015 and June 27, 2014, respectively, and nil and $2 million during the nine months ended June 26, 2015 and June 27, 2014, respectively. The amounts presented within discontinued operations are costs directly related to the 2012 Separation that are not expected to provide a future benefit to the Company. In addition to pre-tax charges, the Company incurred tax-related charges of nil and $9 million during the quarters ended June 26, 2015 and June 27, 2014, respectively, and nil and $9 million during the nine months ended June 26, 2015 and June 27, 2014, respectively. The Company received associated tax benefits of nil during both quarters ended June 26, 2015 and June 27, 2014 and nil and $11 million during the nine months ended June 26, 2015 and June 27, 2014, respectively. The Company does not expect to incur material separation charges relating to activities taken to complete the 2012 Separation in future periods.
3.    Divestitures
The Company continually assesses the strategic fit of its various businesses and from time to time divests businesses which do not align with its long-term strategy.
During fiscal 2014, the Company announced that it intended to sell several businesses in the ROW Installation & Services segment. The Company completed the sale of these businesses during the quarter ended June 26, 2015, and recorded a loss on

9
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


sale of $29 million and $28 million in (Loss) income from discontinued operations, net of taxes on the Consolidated Statements of Operations for the quarter and nine months ended June 26, 2015, respectively. These businesses were accounted for as held for sale on the Consolidated Balance Sheets as of September 26, 2014 and their results of operations have been presented within discontinued operations on the Consolidated Statements of Operations during the quarters and nine months ended June 26, 2015 and June 27, 2014.
In addition, during the quarter ended June 26, 2015, the Company completed the sale of a business in the ROW Installation & Services segment. The Company recorded $22 million in Selling, general and administrative expenses on the Consolidated Statements of Operations for an anticipated loss on disposal during the quarter ended March 27, 2015. This business was presented as held for sale as of September 26, 2014; however, it did not meet the criteria to be classified as a discontinued operation, and thus its results of operations were included in continuing operations in the Consolidated Financial Statements.
During the quarter ended March 27, 2015, the Company concluded that a business in the ROW Installation & Services segment which it intends to sell met the criteria to be classified as held for sale. This business is accounted for as held for sale on the Consolidated Balance Sheets as of June 26, 2015 and September 26, 2014, and its results of operations have been presented as discontinued operations on the Consolidated Statements of Operations during the quarters and nine months ended June 26, 2015 and June 27, 2014. The Company expects to complete the sale of this business during the first half of fiscal 2016.
Discontinued Operations
The components of (loss) income from discontinued operations, net of income taxes are as follows ($ in millions):
 
For the Quarters Ended
 
For the Nine Months Ended
 
June 26, 2015
 
June 27, 2014
 
June 26, 2015
 
June 27, 2014
Net revenue
$
5

 
$
87

 
$
15

 
$
397

Pre-tax (loss) income from discontinued operations
(3
)
 
8

 
(12
)
 
59

Pre-tax separation loss included within discontinued operations (See Note 2)
—

 
(1
)
 
—

 
(2
)
Pre-tax (loss) gain on sale of discontinued operations
(29
)
 
1,179

 
(28
)
 
1,175

Income tax expense
—

 
(171
)
 
(10
)
 
(177
)
(Loss) income from discontinued operations, net of income taxes
$
(32
)
 
$
1,015

 
$
(50
)
 
$
1,055

Balance sheet information for the assets and liabilities of businesses classified as held for sale as of June 26, 2015 and September 26, 2014 was as follows ($ in millions):
 
As of
 
June 26, 2015
 
September 26, 2014
Accounts receivable, net
$
1

 
$
26

Inventories
—

 
7

Prepaid expenses and other current assets
1

 
107

Deferred income taxes
1

 
3

Property, plant and equipment, net
1

 
6

Goodwill
1

 
3

Intangible assets, net
8

 
25

Other assets
—

 
3

  Total assets
$
13

 
$
180

Accounts payable
1

 
48

Accrued and other current liabilities
2

 
62

Deferred revenue
—

 
2

Other liabilities
3

 
6

  Total liabilities
$
6

 
$
118


10
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Because the Company utilizes a centralized approach to cash management and the financing of its operations, all cash that is generated by discontinued operations is routinely transferred to the Company's financing subsidiaries in continuing operations. As a result, Transfers from discontinued operations on the Company's Consolidated Statement of Cash Flows reflects the net cash movements from discontinued operations to continuing operations that have occurred during the period.
4.    Restructuring and Asset Impairment Charges, Net
During fiscal 2015, the Company identified and pursued additional opportunities for cost savings through restructuring activities and workforce reductions to improve operating efficiencies across the Company's businesses. The Company expects to incur restructuring and restructuring related charges of approximately $125 million in fiscal 2015, which does not include repositioning charges as described below.
The Company recorded restructuring and asset impairment charges by action as follows ($ in millions):
 
For the Quarters Ended
 
For the Nine Months Ended
 
June 26, 2015
 
June 27, 2014
 
June 26, 2015
 
June 27, 2014
2015 actions
$
39

 
$
—

 
$
97

 
$
—

2014 actions
1

 
19

 
11

 
28

2013 and prior actions
(2
)
 
(2
)
 
—

 
(1
)
Total
$
38

 
$
17

 
$
108

 
$
27

2015 Actions
Restructuring and asset impairment charges, net, during the quarter and nine months ended June 26, 2015 related to the 2015 actions are as follows ($ in millions):
 
For the Quarter Ended June 26, 2015
 
Employee
Severance and
Benefits
 
Facility Exit and Other Charges
 
Total
NA Installation & Services
$
1

 
$
—

 
$
1

ROW Installation & Services
34

 
1

 
35

Global Products
1

 
—

 
1

Corporate and other
2

 
—

 
2

Total
$
38

 
$
1

 
$
39

 
For the Nine Months Ended June 26, 2015
 
Employee
Severance and
Benefits
 
Facility Exit and Other Charges
 
Total
NA Installation & Services
$
27

 
$
—

 
$
27

ROW Installation & Services
48

 
6

 
54

Global Products
4

 
—

 
4

Corporate and Other
12

 
—

 
12

Total
$
91

 
$
6

 
$
97


11
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The rollforward of the reserves from September 26, 2014 to June 26, 2015 is as follows ($ in millions):
Balance as of September 26, 2014
$
—

Charges
99

Reversals
(2
)
Utilization
(40
)
Currency translation
(1
)
Balance as of June 26, 2015
$
56

Restructuring reserves for businesses that are included within Liabilities held for sale on the Consolidated Balance Sheets are excluded from the table above. See Note 3.
2014 Actions
Restructuring and asset impairment charges, net, during the quarters and nine months ended June 26, 2015 and June 27, 2014 related to the 2014 actions are as follows ($ in millions):
 
For the Quarter Ended
June 26, 2015
 
For the Quarter Ended
June 27, 2014
 
Employee
Severance and
Benefits
 
Employee
Severance and
Benefits
 
Facility Exit and Other Charges
 
Total
NA Installation & Services
$
(1
)
 
$
7

 
$
—

 
$
7

ROW Installation & Services
—

 
7

 
3

 
10

Global Products
2

 
2

 
—

 
2

Total
$
1

 
$
16

 
$
3

 
$
19

 
For the Nine Months Ended
June 26, 2015
 
For the Nine Months Ended
June 27, 2014
 
Employee
Severance and
Benefits
 
Employee
Severance and
Benefits
 
Facility Exit and Other Charges
 
Total
NA Installation & Services
$
—

 
$
10

 
$
—

 
$
10

ROW Installation & Services
—

 
12

 
3

 
15

Global Products
11

 
3

 
—

 
3

Total
$
11

 
$
25

 
$
3

 
$
28


Restructuring and asset impairment charges, net, incurred cumulative to date from initiation of the 2014 actions are as follows ($ in millions):
 
Employee
Severance and
Benefits
 
Facility Exit
and Other
Charges
 
Charges Reflected in SG&A
 
Total
NA Installation & Services
$
16

 
$
—

 
$
—

 
$
16

ROW Installation & Services
18

 
5

 
—

 
23

Global Products
14

 
—

 
2

 
16

Total
$
48

 
$
5

 
$
2

 
$
55


12
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The rollforward of the reserves from September 26, 2014 to June 26, 2015 is as follows ($ in millions):
Balance as of September 26, 2014
$
29

Charges
13

Reversals
(2
)
Utilization
(17
)
Currency translation
(3
)
Balance as of June 26, 2015
$
20

Restructuring reserves for businesses that are included within Liabilities held for sale on the Consolidated Balance Sheets are excluded from the table above. See Note 3.
2013 and prior actions
The Company continues to maintain restructuring reserves related to actions initiated prior to fiscal 2014. The total amount of these reserves was $44 million and $70 million as of June 26, 2015 and September 26, 2014, respectively. The Company incurred nil and $3 million of restructuring charges, $2 million and $5 million of reversals, and utilized $6 million and $10 million for the quarters ended June 26, 2015 and June 27, 2014, respectively, related to 2013 and prior actions. The Company incurred $5 million and $17 million of restructuring charges, $5 million and $18 million of reversals, and utilized $21 million and $51 million for the nine months ended June 26, 2015 and June 27, 2014, respectively, related to 2013 and prior actions. The remaining change in reserve during the quarters and nine months ended June 26, 2015 and June 27, 2014 relates to currency translation. The aggregate remaining reserves primarily relate to facility exit costs for long-term non-cancelable lease obligations primarily within the Company's ROW Installation & Services segment.
Total Restructuring Reserves
As of June 26, 2015 and September 26, 2014, restructuring reserves related to all actions were included in the Company's Consolidated Balance Sheets as follows ($ in millions):
 
As of
 
June 26,
2015
 
September 26, 2014
Accrued and other current liabilities
$
106

 
$
83

Other liabilities
14

 
16

Total
$
120

 
$
99

Restructuring reserves for businesses that are included within Liabilities held for sale on the Consolidated Balance Sheets are excluded from the table above. See Note 3.
Repositioning
The Company has initiated certain global actions designed to reduce its cost structure and improve future profitability by streamlining operations and better aligning functions, which the Company refers to as repositioning actions. These actions may or may not lead to a future restructuring action. During the quarters ended June 26, 2015 and June 27, 2014, the Company recorded repositioning charges of $27 million and $13 million, respectively, and $61 million and $28 million for the nine months ended June 26, 2015 and June 27, 2014, respectively, primarily related to professional fees which have been reflected in Selling, general and administrative expenses in the Consolidated Statements of Operations.
5.    Acquisitions
During the quarter ended June 26, 2015 the Company did not complete any acquisitions. During the nine months ended June 26, 2015, total consideration paid, net of $26 million of cash acquired and $8 million of a holdback liability, for 11 acquisitions included in continuing operations was $525 million. The largest of these was the acquisition of Industrial Safety Technologies International ("IST"), a global leader in gas and flame detection with operations in Europe, the Middle East, China, and the U.S., for total consideration paid, net of $5 million of cash acquired, of $327 million. The purchase price for IST was allocated as follows: $68 million of assets, $136 million of goodwill, $143 million of intangible assets and the assumption of $15 million of liabilities. IST is being integrated into the Global Products segment. The remaining 10 acquisitions are being integrated into the ROW Installation & Services and Global Products segments.

13
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The determination of fair value for certain assets and liabilities relating to the acquisitions made during the quarters ended December 27, 2014 and March 27, 2015 has been finalized, with no material adjustment to the purchase price allocation.
During the quarter ended June 27, 2014, cash paid for acquisitions included in continuing operations totaled $9 million, which was related to an acquisition within the Company's ROW Installation & Services segment.
During the nine months ended June 27, 2014, total consideration paid was $67 million, which in addition to the acquisition within ROW Installation & Services segment described above, is comprised of $54 million, net of $1 million cash acquired, and $1 million of contingent consideration. This was entirely related to the acquisition of Westfire, Inc. ("Westfire") on November 8, 2013. Westfire, a fire protection services company with operations in the United States, Chile and Peru, provides critical special-hazard suppression and detection applications in mining, telecommunications and other vertical markets and has been integrated into the NA Installation & Services and ROW Installation & Services segments.
6.    Income Taxes
Tyco did not have a significant change to its unrecognized tax benefits during the quarter ended June 26, 2015.
Many of Tyco's uncertain tax positions relate to tax years that remain subject to audit by the taxing authorities in U.S. federal, state and local or foreign jurisdictions. Open tax years in significant jurisdictions included in continuing operations are as follows:
Jurisdiction
Years Open
To Audit
Australia
2004-2014
Canada
2006-2014
Germany
2005-2014
Ireland
2010-2014
Switzerland
2005-2014
United Kingdom
2012-2014
United States
1997-2014
Based on the current status of its income tax audits, Tyco believes that it is reasonably possible that between nil and $2 million in unrecognized tax benefits may be resolved in the next twelve months.
At each balance sheet date, the Company evaluates whether it is more likely than not that Tyco's deferred tax assets will be realized and if sufficient future taxable income will be available by assessing current period and projected operating results and other pertinent data. As of June 26, 2015, Tyco recorded deferred tax assets of approximately $329 million, which is comprised of $2.3 billion gross deferred tax assets net of $2.0 billion valuation allowances.
Tax Sharing Agreement and Other Income Tax Matters
In connection with the 2012 and 2007 Separations, Tyco entered into the 2012 and 2007 Tax Sharing Agreements, respectively, that govern the respective rights, responsibilities, and obligations of (i) Tyco, Pentair and ADT after the 2012 Separation and (ii) Tyco, Medtronic (formerly Covidien plc) and TE Connectivity after the 2007 Separation, with respect to taxes. Specifically, this includes taxes in the ordinary course of business and taxes, if any, incurred as a result of any failure of the respective distributions to qualify tax-free for U.S. federal income tax purposes within the meaning of Section 355 of the Internal Revenue Code ("the Code") or certain internal transactions undertaken in anticipation of the spin-offs to qualify for tax-favored treatment under the Code.
Under the 2012 Tax Sharing Agreement, Tyco, Pentair and ADT share (i) certain pre-Distribution income tax liabilities that arise from adjustments made by tax authorities to ADT's, Tyco Flow Control's and Tyco's income tax returns, and (ii) payments required to be made by Tyco with respect to the 2007 Tax Sharing Agreement, excluding approximately $175 million of pre-2012 Separation related tax liabilities (collectively, "Shared Tax Liabilities"). Tyco will be responsible for the first $500 million of Shared Tax Liabilities. Pentair and ADT will share 42% and 58%, respectively, of the next $225 million of Shared Tax Liabilities. Tyco, Pentair and ADT will share 52.5%, 20% and 27.5%, respectively, of Shared Tax Liabilities above $725 million. All costs and expenses associated with the management of these Shared Tax Liabilities will generally be shared 20%, 27.5% and 52.5% by Pentair, ADT and Tyco, respectively. In connection with the execution of the 2012 Tax Sharing

14
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Arrangement, Tyco established liabilities representing the fair market value of its obligations which is recorded in Other liabilities in the Company's Consolidated Balance Sheet with an offset to Tyco shareholders' equity.
Under the 2007 Tax Sharing Agreement, Tyco shares responsibility for certain of Tyco's, Medtronic's and TE Connectivity's income tax liabilities, which result in cash payments, based on a sharing formula for periods prior to and including June 29, 2007. More specifically, Tyco, Medtronic and TE Connectivity share 27%, 42% and 31%, respectively, of shared income tax liabilities that arise from adjustments made by tax authorities to Tyco's, Medtronic's and TE Connectivity's U.S. and certain non-U.S. income tax returns. The costs and expenses associated with the management of these shared tax liabilities are generally shared equally among the parties. In connection with the execution of the 2007 Tax Sharing Agreement, Tyco established a net receivable from Medtronic and TE Connectivity representing the amount Tyco expected to receive for pre-2007 Separation uncertain tax positions, including amounts owed to the Internal Revenue Service ("IRS"). Tyco also established liabilities representing the fair market value of its share of Medtronic's and TE Connectivity's estimated obligations, primarily to the IRS, for their pre-2007 Separation taxes covered by the 2007 Tax Sharing Agreement.
Tyco assesses the shared tax liabilities and related guaranteed liabilities related to both the 2012 and 2007 Tax Sharing Agreements at each reporting period. Tyco will provide payment to Pentair and ADT under the 2012 Tax Sharing Agreement and Medtronic and TE Connectivity under the 2007 Tax Sharing Agreement as the shared income tax liabilities are settled. Settlement is expected to occur as the tax audit and legal processes are completed for the impacted years and cash payments are made. Due to the nature of the unresolved adjustments described in the next paragraph, the maximum amount of future payments under the 2012 and 2007 Tax Sharing Agreements is not known. Such cash payments, when they occur, will reduce the guarantor liability as they represent an equivalent reduction of risk. Tyco also assesses the sufficiency of the 2012 and 2007 Tax Sharing Agreements guarantee liabilities on a quarterly basis and will increase the liability when it is probable that cash payments expected to be made exceed the recorded balance.
Tyco and its subsidiaries' income tax returns are examined periodically by various tax authorities. In connection with these examinations, tax authorities, including the IRS, have raised issues and proposed tax adjustments, in particular with respect to years preceding the 2007 Separation. The issues and proposed adjustments related to such years are generally subject to the sharing provisions of the 2007 Tax Sharing Agreement and Tyco's liabilities under the 2007 Tax Sharing Agreement are further subject to the sharing provisions in the 2012 Tax Sharing Agreement. Tyco has previously disclosed that in connection with U.S. federal tax audits, the IRS has raised a number of issues and proposed tax adjustments for periods beginning with the 1997 tax year. Although Tyco has been able to resolve substantially all of the issues and adjustments proposed by the IRS for tax years through 2007, it has not been able to resolve matters related to the treatment of certain intercompany debt transactions during the period. As a result, on June 20, 2013, Tyco received Notices of Deficiency from the IRS asserting that several of Tyco's former U.S. subsidiaries owe additional taxes of $883.3 million plus penalties of $154 million based on audits of the 1997 through 2000 tax years of Tyco and its subsidiaries as they existed at that time. In addition, Tyco received Final Partnership Administrative Adjustments for certain U.S. partnerships owned by former U.S. subsidiaries with respect to which an additional tax deficiency of approximately $30 million has been asserted. These amounts exclude interest and do not reflect the impact on subsequent periods if the IRS position described below is ultimately proved correct.
The IRS asserted in the Notices of Deficiency that substantially all of Tyco's intercompany debt originated during the 1997 - 2000 period should not be treated as debt for U.S. federal income tax purposes, and has disallowed interest and related deductions recognized on U.S. income tax returns totaling approximately $2.9 billion. Tyco strongly disagrees with the IRS position and has filed petitions with the U.S. Tax Court contesting the IRS proposed adjustments. A trial date has been set for October 2016. Tyco believes that it has meritorious defenses for its tax filings, that the IRS positions with regard to these matters are inconsistent with the applicable tax laws and existing Treasury regulations, and that the previously reported taxes for the years in question are appropriate.
No payments with respect to these matters would be required until the dispute is definitively resolved, which, based on the experience of other companies, could take several years. Tyco believes that its income tax reserves and the liabilities recorded in the Consolidated Balance Sheet for the Tax Sharing Agreements continue to be appropriate. However, the ultimate resolution of these matters, and the impact of that resolution, are uncertain and could have a material impact on Tyco's financial condition, results of operations and cash flows. In particular, if the IRS is successful in asserting its claim, it would have an adverse impact on interest deductions related to the same intercompany debt in subsequent time periods, totaling approximately $6.6 billion, which is also expected to be disallowed by the IRS.
As noted above, Tyco has assessed its obligations under the 2007 Tax Sharing Agreement to determine that its recorded liability is sufficient to cover the indemnifications made by it under such agreement. In the absence of observable transactions

15
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


for identical or similar guarantees, Tyco determined the fair value of these guarantees and indemnifications utilizing expected present value measurement techniques. Significant assumptions utilized to determine fair value included determining a range of potential outcomes, assigning a probability weighting to each potential outcome and estimating the anticipated timing of resolution. The probability weighted outcomes were discounted using Tyco's incremental borrowing rate. However, the ultimate resolution of these matters is uncertain and could result in a material adverse impact to the Company's financial position, results of operations, cash flows, or the effective tax rate in future reporting periods.
In addition to dealing with tax liabilities for periods prior to the respective Separations, the 2012 and 2007 Tax Sharing Agreements contain sharing provisions to address the contingencies that the 2012 or 2007 Separations, or internal transactions related thereto, may be deemed taxable by U.S. or non U.S. taxing authorities. In the event the 2012 Separation is determined to be taxable and such determination was the result of actions taken after the 2012 Separations by Tyco, ADT or Pentair, the party responsible for such failure would be responsible for all taxes imposed on each company as a result thereof. If such determination is not the result of actions taken by Tyco, ADT or Pentair after the 2012 Separation, then Tyco, ADT and Pentair would be responsible for any taxes imposed on any of the companies as a result of such determination in the same manner and in the same proportions as described above. Similar provisions exist in the 2007 Tax Sharing Agreement. If either of the 2007 or 2012 Separation, or internal transactions taken in anticipation thereof, were deemed taxable, the associated liability could be significant. Tyco is responsible for all of its own taxes that are not shared pursuant to the 2012 and 2007 Tax Sharing Agreements' sharing formulas. In addition, Pentair and ADT, and Medtronic and TE Connectivity are responsible for their tax liabilities that are not subject to the 2012 or 2007 Tax Sharing Agreements' sharing formula.
Each of the 2012 and 2007 Tax Sharing Agreements provides that, if any party to such agreement were to default 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 to the agreement would be required to pay, equally with any other non-defaulting party to the agreement, the amounts in default. In addition, if another party to the 2012 or 2007 Tax Sharing Agreements that is responsible for all or a portion of an income tax liability were to default in its payment of such liability to a taxing authority, Tyco could be liable under applicable tax law for such liabilities and required to make additional tax payments. Accordingly, under certain circumstances, Tyco may be obligated to pay amounts in excess of its agreed-upon share of its tax liabilities under either of the 2012 or 2007 Tax Sharing Agreements.
The receivables and liabilities related to the 2012 and 2007 Tax Sharing Agreements as of June 26, 2015 and September 26, 2014, are as follows ($ in millions):
 
2012 Tax Sharing Agreement
 
2007 Tax Sharing Agreement
 
As of
 
As of
 
June 26, 2015
 
September 26, 2014
 
June 26, 2015
 
September 26, 2014
Tax sharing agreement related receivables:
 
 
 
 
 
 
 
Prepaid expenses and other current assets
$
—

 
$
—

 
$
2

 
$
3

Other assets
—

 
—

 
24

 
23

 
—

 
—

 
26

 
26

Tax sharing agreement related liabilities:
 
 
 
 
 
 
 
Accrued and other current liabilities
—

 
—

 
(21
)
 
(21
)
Other liabilities
(46
)
 
(46
)
 
(194
)
 
(194
)
 
(46
)
 
(46
)
 
(215
)
 
(215
)
Net liability
$
(46
)
 
$
(46
)
 
$
(189
)
 
$
(189
)
Other Income Tax Matters
Except for earnings that are currently distributed, no additional material provision has been made for U.S. or non-U.S. income taxes on the undistributed earnings of subsidiaries or for deferred tax liabilities for temporary differences related to investments in subsidiaries, since the earnings are expected to be permanently reinvested, the investments are essentially permanent in duration, or Tyco has concluded that no additional tax liability will arise as a result of the distribution of such earnings. A liability could arise if amounts are distributed by such subsidiaries or if such subsidiaries are ultimately disposed. It is not practicable to estimate the additional income taxes related to permanently reinvested earnings or the basis differences related to investments in subsidiaries.

16
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


7.    Earnings Per Share
The reconciliations between basic and diluted earnings per share attributable to Tyco ordinary shareholders are as follows (in millions, except per share data):
 
For the Quarter Ended
June 26, 2015
 
For the Quarter Ended
June 27, 2014
 
Income
 
Shares
 
Per Share
Amount
 
Income
 
Shares
 
Per Share
Amount
Basic earnings per share attributable to Tyco ordinary shareholders:
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
$
188

 
421

 
$
0.45

 
$
435

 
458

 
$
0.95

Share options and restricted share awards
—

 
6

 
 
 
—

 
8

 
 
Diluted earnings per share attributable to Tyco ordinary shareholders:
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations attributable to Tyco ordinary shareholders, giving effect to dilutive adjustments
$
188

 
427

 
$
0.44

 
$
435

 
466

 
$
0.93

 
For the Nine Months Ended
June 26, 2015
 
For the Nine Months Ended
June 27, 2014
 
Income
 
Shares
 
Per Share
Amount
 
Income
 
Shares
 
Per Share
Amount
Basic earnings per share attributable to Tyco ordinary shareholders:
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
$
535

 
421

 
$
1.27

 
$
872

 
461

 
$
1.89

Share options and restricted share awards
—

 
6

 
 
 
—

 
8

 
 
Diluted earnings per share attributable to Tyco ordinary shareholders:
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations attributable to Tyco ordinary shareholders, giving effect to dilutive adjustments
$
535

 
427

 
$
1.25

 
$
872

 
469

 
$
1.86

The computation of diluted earnings per share for the quarter and nine months ended June 26, 2015 excludes the effect of the potential exercise of share options to purchase approximately 3 million shares for both periods and excludes restricted stock units of approximately 1 million and 2 million shares, respectively, for the quarter and nine months ended June 26, 2015 because the effect would be anti-dilutive.
The computation of diluted earnings per share for the quarter and nine months ended June 27, 2014 excludes the effect of the potential exercise of share options to purchase approximately 2 million shares for both periods and excludes restricted stock units of approximately 1 million and 2 million shares, respectively, for the quarter and nine months ended June 27, 2014 because the effect would be anti-dilutive.

17
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


8.    Goodwill and Intangible Assets
The changes in the carrying amount of goodwill by segment are as follows ($ in millions):
 
NA Installation &
Services
 
ROW
Installation &
Services
 
Global
Products
 
Total
 
 
 
 
 
 
 
 
Gross goodwill
$
2,104

 
$
1,991

 
$
1,824

 
$
5,919

Accumulated impairment
(126
)
 
(1,068
)
 
(567
)
 
(1,761
)
Carrying amount of goodwill as of September 27, 2013
1,978

 
923

 
1,257

 
4,158

2014 activity:


 


 


 


Acquisitions/ purchase accounting adjustments
10

 
15

 
(4
)
 
21

Currency translation
(12
)
 
(34
)
 
(11
)
 
(57
)


 

 

 

Gross goodwill
$
2,102

 
$
1,972

 
$
1,809

 
$
5,883

Accumulated impairment
(126
)
 
(1,068
)
 
(567
)
 
(1,761
)
Carrying amount of goodwill as of September 26, 2014
1,976

 
904

 
1,242

 
4,122

2015 activity:


 


 


 


Acquisitions / purchase accounting adjustments
15

 
30

 
276

 
321

Currency translation
(18
)
 
(110
)
 
(24
)
 
(152
)


 

 

 

Gross goodwill
$
2,099

 
$
1,892

 
$
2,061

 
$
6,052

Accumulated impairment
(126
)
 
(1,068
)
 
(567
)
 
(1,761
)
Carrying amount of goodwill as of June 26, 2015
$
1,973

 
$
824

 
$
1,494

 
$
4,291

The following table sets forth the gross carrying amount and accumulated amortization of the Company's intangible assets as of June 26, 2015 and September 26, 2014 ($ in millions):
 
As of
 
June 26, 2015
 
September 26, 2014
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
Amortizable:
 
 
 
 
 
 
 
Contracts and related customer relationships
$
1,361

 
$
1,047

 
$
1,400

 
$
1,113

Intellectual property
770

 
505

 
608

 
487

Other
11

 
8

 
29

 
15

Total
$
2,142

 
$
1,560

 
$
2,037

 
$
1,615

Non-Amortizable:
 
 
 
 
 
 
 
Intellectual property
$
212

 
 

 
$
214

 
 
Franchise rights
76

 
 

 
76

 
 
In-process research and development
20

 
 
 
—

 
 
Total
$
308

 
 

 
$
290

 
 
Intangible asset amortization expense for the quarters ended June 26, 2015 and June 27, 2014 was $24 million and $22 million, respectively. Intangible asset amortization expense for the nine months ended June 26, 2015 and June 27, 2014 was $65 million and $68 million, respectively.
The estimated aggregate amortization expense on intangible assets is expected to be approximately $22 million for the remainder of 2015, $87 million for 2016, $78 million for 2017, $73 million for 2018, and $322 million for 2019 and thereafter.

18
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


9.    Debt
Debt as of June 26, 2015 and September 26, 2014 is as follows ($ in millions):
 
As of
 
June 26, 2015
 
September 26, 2014
3.375% public notes due 2015 (1)
$
258

 
$
258

3.75% public notes due 2018
67

 
67

8.5% public notes due 2019
364

 
364

7.0% public notes due 2019
245

 
245

6.875% public notes due 2021
465

 
465

4.625% public notes due 2023
42

 
42

1.375% public notes due 2025
559

 
—

Other (2)
21

 
22

Total debt
2,021

 
1,463

Less current portion
277

 
20

Long-term debt
$
1,744

 
$
1,443

_______________________________________________________________________________
(1) $258 million of 3.375% public notes due October 2015 is included in the current portion of debt as of June 26, 2015.
(2) $19 million and $20 million, respectively, of the amount shown as other is included in the current portion of the Company's total debt as of June 26, 2015 and September 26, 2014.
Fair Value
The carrying amount of Tyco's debt subject to the fair value disclosure requirements as of June 26, 2015 and September 26, 2014 was $2,000 million and $1,441 million, respectively. The Company has determined the fair value of such debt to be $2,177 million and $1,670 million as of June 26, 2015 and September 26, 2014, respectively. The Company utilizes various valuation methodologies to determine the fair value of its debt, which is primarily dependent on the type of market in which the Company's debt is traded. When available, the Company uses quoted market prices to determine the fair value of its debt that is traded in active markets. As of June 26, 2015 and September 26, 2014, $2,000 million and $1,441 million, respectively, of the Company's debt, which is actively traded and subject to the fair value disclosure requirements, is classified as Level 1 in the fair value hierarchy.
Commercial Paper
From time to time, the Company's wholly-owned subsidiary, Tyco International Finance S.A. ("TIFSA") may issue commercial paper for general corporate purposes. The maximum aggregate amount of unsecured commercial paper notes available to be issued on a private placement basis under the commercial paper program is $1 billion as of June 26, 2015. As of June 26, 2015 and September 26, 2014, TIFSA had no commercial paper outstanding.
Credit Facilities
The Company's committed revolving credit facility totaled $1 billion as of June 26, 2015. This revolving credit facility may be used for working capital, capital expenditures and general corporate purposes. As of June 26, 2015 and September 26, 2014, there were no amounts drawn under the Company's revolving credit facility. Interest under the revolving credit facility is variable and is calculated by reference to LIBOR or an alternate base rate.
Debt Issuance/Repayment
On February 25, 2015, TIFSA issued €500 million aggregate principal amount of 1.375% Notes due February 25, 2025 (the "Notes"), which are fully and unconditionally guaranteed by each of the Company and Tyco Fire & Security Finance S.C.A. TIFSA received total net proceeds of approximately $563 million after deducting debt issuance costs of approximately $5 million and a debt discount of approximately $1 million. The net proceeds were made available for general corporate purposes. The Notes are TIFSA’s senior unsecured obligations and rank equally in right of payment with all of its existing and

19
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


future senior debt, and senior to any subordinated indebtedness that TIFSA may incur. The Notes were designated as a net investment hedge. See Note 10.
10.    Financial Instruments
The Company's financial instruments consist primarily of cash and cash equivalents, time deposits, accounts receivable, investments, accounts payable, debt and derivative financial instruments. The fair value of cash and cash equivalents, time deposits, accounts receivable, and accounts payable approximated book value as of June 26, 2015 and September 26, 2014. The fair value of derivative financial instruments was not material to any of the periods presented. See below for the fair value of investments and Note 9 for the fair value of debt.
Derivative Instruments
In the normal course of business, Tyco is exposed to market risk arising from changes in currency exchange rates, interest rates and commodity prices. The Company may use derivative financial instruments to manage exposures to foreign currency, interest rate and commodity risks. The Company's objective for utilizing derivative financial instruments is to manage these risks using the most effective methods to eliminate or reduce the impacts of these exposures. The Company does not use derivative financial instruments for trading or speculative purposes. As of and during the nine months ended June 26, 2015, the Company did not hold or enter into any commodity derivative instruments or interest rate swaps.
For derivative instruments that are designated and qualified as hedging instruments for accounting purposes, the Company documents and links the relationships between the hedging instruments and hedged items. The Company also assesses and documents at the hedge's inception whether the derivatives used in hedging transactions are effective in offsetting changes in fair values associated with the hedged items. During the quarter ended March 27, 2015, the Company designated its €500 million of 1.375% public notes due February 2025 as a net investment hedge of the Company’s investments in certain of its international subsidiaries that use the Euro as their functional currency and intercompany permanent loans in order to reduce the volatility caused by changes in foreign currency exchange rates of the Euro with respect to the U.S. Dollar. During the quarter and nine months ended June 26, 2015, the change in the carrying value due to remeasurement of the Euro denominated 2025 Notes resulted in a $12 million loss and an $8 million gain, respectively, reported in Accumulated other comprehensive loss on the Consolidated Balance Sheets. This hedge did not result in any hedge ineffectiveness for the quarter and nine months ended June 26, 2015. During the quarter and nine months ended June 27, 2014, the Company did not have hedging instruments that were designated and qualified as hedging instruments for accounting purposes.
As of June 26, 2015 and September 26, 2014, the total gross notional amount of the Company's foreign exchange contracts was $400 million and $258 million, respectively. The fair value of these derivative financial instruments and impact of such changes in the fair value was not material to the Consolidated Balance Sheets as of June 26, 2015 and September 26, 2014 or Consolidated Statements of Operations and Consolidated Statements of Cash Flows for the quarters and nine months ended June 26, 2015 and June 27, 2014.
Counterparty Credit Risk
The use of derivative financial instruments exposes the Company to counterparty credit risk. Tyco has established policies and procedures to limit the potential for counterparty credit risk, including establishing limits for credit exposure and continually assessing the creditworthiness of counterparties. As a matter of practice, the Company deals with major banks worldwide having strong investment grade long-term credit ratings. To further reduce the risk of loss, the Company generally enters into International Swaps and Derivatives Association master netting agreements with substantially all of its counterparties. The Company's derivative contracts do not contain any credit risk related contingent features and do not require collateral or other security to be furnished by the Company or the counterparties. The Company's exposure to credit risk associated with its derivative instruments is measured on an individual counterparty basis, as well as by groups of counterparties that share similar attributes. We do not anticipate any non-performance by any of our counterparties, and the concentration of risk with financial institutions does not present significant credit risk to the Company.
Cash Equivalents and Investments
The fair value of cash equivalents approximates carrying value and are included in Level 1.
Investments may include marketable securities such as U.S. government obligations, U.S. government agency and corporate debt securities, equity securities, exchange traded funds or time deposits with banks.

20
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


When available, the Company uses quoted market prices to determine the fair value of investment securities. Such investments are included in Level 1. When quoted market prices are not readily available, pricing determinations are made based on the results of market approach valuation models using observable market data such as recently reported trades, bid and offer information and benchmark securities. These investments are included in Level 2 and consist primarily of U.S. government agency securities and corporate debt securities.
Assets Measured at Fair Value on a Recurring Basis
The following table presents the Company's hierarchy for its assets measured at fair value on a recurring basis as of June 26, 2015 and September 26, 2014 ($ in millions):
 
 
 
 
 
 
 
Consolidated Balance Sheet
Classification
 
As of June 26, 2015
 
Cash and Cash Equivalents
 
Prepaids and
Other Current
Assets
 
Other Assets
Investment Assets:
Level 1
 
Level 2
 
Total
 
 
 
Cash equivalents
$
91

 
$
—

 
$
91

 
$
91

 
$
—

 
$
—

Available-for-sale securities:


 


 


 
 
 


 
 
  Exchange traded funds (fixed income) (1)
190

 
—

 
190

 
—

 
15

 
175

  Exchange traded funds (equity) (1)
85

 
—

 
85

 
—

 
—

 
85

Trading securities:
 
 
 
 
 
 
 
 
 
 
 
  Exchange traded funds (equity)
64

 
—

 
64

 
—

 
64

 
—

 
$
430

 
$
—

 
$
430

 
$
91

 
$
79

 
$
260

(1) Classified as restricted investments. See Note 11.
 
 
 
 
 
 
 
Consolidated Balance Sheet
Classification
 
As of September 26, 2014
 
Cash and Cash Equivalents
 
Prepaids and
Other Current
Assets
Investment Assets:
Level 1
 
Level 2
 
Total
 
 
Cash equivalents
$
223

 
$
—

 
$
223

 
$
223

 
$
—

Time deposits
275

 
—

 
275

 
—

 
275

Trading securities:
 
 
 
 
 
 
 
 
 
  Exchange traded funds (equity)
62

 
—

 
62

 
—

 
62

 
$
560

 
$
—

 
$
560

 
$
223

 
$
337

During the quarter and nine months ended June 26, 2015, the Company did not have any significant transfers between levels within the fair value hierarchy.
Unrealized gains and losses related to trading securities are recorded in Other (expense) income, net in the Consolidated Statements of Operations. The Company recorded gains of $1 million and $5 million for the quarter and nine months ended June 26, 2015, respectively. The Company did not hold these investments during the quarter and nine months ended June 27, 2014. Unrealized gains and losses related to available for sale securities are recorded in Other comprehensive income. The Company recorded losses of $6 million for both the quarter and nine months ended June 26, 2015, and losses of $1 million for both the quarter and nine months ended June 27, 2014.
Other
The Company had $1.4 billion and $1.5 billion of intercompany loans designated as permanent in nature as of June 26, 2015 and September 26, 2014, respectively. Additionally, for the quarters ended June 26, 2015 and June 27, 2014, the Company recorded $40 million of a cumulative translation gain and $3 million of a cumulative translation loss, respectively, through Accumulated other comprehensive loss related to these loans.
For the nine months ended June 26, 2015 and June 27, 2014, the Company recorded $105 million of a cumulative translation loss and $1 million of a cumulative translation gain, respectively, through Accumulated other comprehensive loss related to these loans.

21
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


11.    Commitments and Contingencies
Legacy Matters Related to Former Management
In recent years, the Company has settled several lawsuits involving disputes with former management. With respect to Dennis Kozlowski, the Company's former chief executive officer, in the first quarter of fiscal 2014, the parties signed an agreement resolving all outstanding disputes, with Mr. Kozlowski agreeing to release the Company from any claims to monetary amounts related to compensation, retention or other arrangements. As a result, in the first quarter of fiscal 2014, the Company reversed a non-cash net liability of approximately $92 million which was recorded in Selling, general and administrative expenses in the Consolidated Statement of Operations for the amounts allegedly due to him. Pursuant to the settlement agreement, Tyco will be entitled to a portion of the proceeds, if any, from the future sale of certain assets owned by Mr. Kozlowski, the timing and amount of which is uncertain. During the quarter ended June 26, 2015, the Company received approximately $4 million in cash from the sale of property owned by Mr. Kozlowski, $2 million of which will be shared pursuant to the terms of a legacy class action lawsuit, resulting in a net recovery of $2 million for the Company, which was recorded in Selling, general and administrative expenses in the Consolidated Statement of Operations. The cash received has been classified as restricted.
With respect to Mark Swartz, the Company's former chief financial officer, in November 2014, the parties reached a definitive agreement to resolve all outstanding disputes, with Mr. Swartz agreeing to release the Company from any claims to monetary amounts related to compensation, retention or other arrangements alleged to have existed between him and the Company. In the first quarter of fiscal 2015, the Company also received approximately $12 million in cash from Mr. Swartz, $5 million of which will be shared pursuant to the terms of a legacy class action lawsuit, resulting in a net recovery of $7 million for the Company, which was recorded in Selling, general and administrative expenses in the Consolidated Statement of Operations. The cash received has been classified as restricted.
Environmental Matters
Tyco is involved in various stages of investigation and cleanup related to 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 June 26, 2015, Tyco concluded that it was probable that it would incur remedial costs in the range of approximately $29 million to $72 million. As of June 26, 2015, Tyco concluded that the best estimate within this range is approximately $33 million, of which $15 million is included in Accrued and other current liabilities and $18 million is included in Other liabilities in the Company's Consolidated Balance Sheet.
The majority of the liabilities described above relate to ongoing remediation efforts at a facility in the Company's Global Products segment located in Marinette, Wisconsin, which the Company acquired in 1990 in connection with its acquisition of, among other things, the Ansul product line. Prior to Tyco's acquisition, Ansul manufactured arsenic-based agricultural herbicides at the Marinette facility, which resulted in significant arsenic contamination of soil and groundwater on the Marinette site and in parts of the adjoining Menominee River. Ansul has been engaged in ongoing remediation efforts at the Marinette site since 1990, and in February 2009 entered into an Administrative Consent Order (the "Consent Order") with the U.S. Environmental Protection Agency to address the presence of arsenic at the Marinette site. Under this agreement, Ansul's principal obligations are to contain the arsenic contamination on the site, pump and treat on-site groundwater, dredge, treat and properly dispose of contaminated sediments in the adjoining river areas, and monitor contamination levels on an ongoing basis. Activities completed under the Consent Order since 2009 include the installation of a subsurface barrier wall around the facility to contain contaminated groundwater, the installation of a groundwater extraction and treatment system and the dredging and offsite disposal of treated river sediment. As of June 26, 2015, the Company concluded that its remaining remediation and monitoring costs related to the Marinette facility were in the range of approximately $20 million to $47 million. The Company's best estimate within that range is approximately $23 million, of which $11 million is included in Accrued and other current liabilities and $12 million is included in Other liabilities in the Company's Consolidated Balance Sheet. Although the Company has recorded its best estimate of the costs that it will incur to remediate and monitor the arsenic contamination at the Marinette facility, it is possible that technological, regulatory or enforcement developments, the results of environmental studies or other factors could change the Company's expectations with respect to future charges and cash outlays, and such changes could be material to the Company's future results of operations, financial condition or cash flows.

22
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Asbestos Matters
The Company and certain of its subsidiaries, including Yarway Corporation (“Yarway”) and Grinnell LLC (“Grinnell”), along with numerous other third parties, are named as defendants in personal injury lawsuits based on alleged exposure to asbestos containing materials. Over 90% of cases pending against affiliates of the Company have been filed against Yarway or Grinnell, and have typically involved product liability claims based primarily on allegations of manufacture, sale or distribution of industrial products that either contained asbestos or were used with asbestos containing components. Claims filed against Yarway derive from Yarway’s purported use of asbestos-containing gaskets and packing in the sale or distribution of steam valves and traps and from its alleged manufacture of asbestos-containing expansion joint packing. Yarway’s alleged manufacture, distribution and/or sale of asbestos-containing materials ceased by 1988, and Yarway ceased substantially all of its manufacturing, distribution and sales operations in 2003. Claims filed against Grinnell typically allege that it manufactured, sold or distributed valves, gaskets, piping and sprinkler systems containing asbestos.
As of June 26, 2015, the Company has determined that there were approximately 3,400 claims pending against it. This amount reflects the Company's current estimate of the number of viable claims made against it, excludes any claims against Yarway, and includes adjustments for claims that are not actively being prosecuted, identify incorrect defendants, are duplicative of other actions or for which the Company is indemnified by third parties. As a result of the Yarway bankruptcy filing described below, claims against Yarway have been stayed since April 2013.
As of June 26, 2015, the Company's estimated net liability, including Yarway, recorded within the Company's Consolidated Balance Sheet is $331 million. The net liability is comprised of a liability for pending and future claims and related defense costs of $838 million, of which $344 million is recorded in Accrued and other current liabilities, and $494 million is recorded in Other liabilities. The Company also maintains separate cash, investment and other assets of $507 million, of which $44 million is recorded in Prepaid expenses and other current assets, and $463 million is recorded in Other assets. Assets include $16 million of cash and $275 million of investments, which have all been designated as restricted. The Company believes that the asbestos related liabilities and insurance related assets as of June 26, 2015 are appropriate. As of September 26, 2014, the Company's estimated net liability, including Yarway, of $608 million was recorded within the Company's Consolidated Balance Sheet as a liability for pending and future claims and related defense costs of $853 million, and separately as an asset for insurance recoveries of $245 million.
Yarway
As previously disclosed, on April 22, 2013 Yarway filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code (“Chapter 11”) in the United States Bankruptcy Court for the District of Delaware (“Bankruptcy Court”). As a result of this filing, the continuation or commencement of asbestos-related litigation against Yarway has been enjoined by the automatic stay imposed by the U.S. Bankruptcy Code. Yarway's goal has been to negotiate, obtain approval of, and consummate a plan of reorganization that establishes a trust to fairly and equitably value and pay current and future Yarway asbestos claims, and that, in exchange for funding of the trust by the Company and/or its subsidiaries, provides permanent injunctive relief protecting the Company, each of its current and former affiliates and various other parties (the “Company Protected Parties”) from any further asbestos claims based on products manufactured, sold, and/or distributed by Yarway. On October 9, 2014, the Company reached an agreement in principle with Yarway, the Official Committee of Asbestos Claimants (“ACC”) appointed in the Yarway Chapter 11 case as the representative of current Yarway asbestos claimants, and the Future Claimants Representative (“FCR”) appointed in the Yarway Chapter 11 case as the representative of future Yarway asbestos claimants, to fund a section 524(g) trust for the resolution and payment of current and future Yarway asbestos claims. The agreement in principle will be implemented through a Chapter 11 plan of reorganization for Yarway, and is intended to resolve the potential liability of the Company Protected Parties for pending and future derivative personal injury claims related to exposure to asbestos-containing products that were allegedly manufactured, distributed, and/or sold by Yarway (“Yarway Asbestos Claims”). Under the Chapter 11 plan, an asbestos settlement trust (the “Yarway Trust”) that conforms to the provisions of Section 524(g) of the U.S. Bankruptcy Code will be established and, on the effective date of the Chapter 11 plan, the Company and Yarway will contribute to the Yarway Trust a total of approximately $325 million in cash (“Settlement Consideration”), which includes approximately $100 million relating to the settlement of intercompany amounts allegedly due to Yarway. In exchange for the Settlement Consideration, each of the Company Protected Parties will receive the benefit of a release from Yarway and an injunction under section 524(g) of the Bankruptcy Code permanently enjoining the assertion of Yarway Asbestos Claims against those Parties. On April 8, 2015, following the approval of the Plan by the required number of Yarway's current asbestos claimants, the Bankruptcy Court issued an order confirming the Plan, and on July 14, 2015, the United States District Court for the District of Delaware affirmed the Plan. Yarway expects to schedule an effective date for the Plan in August 2015.

23
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


On the effective date of the Plan, the Company and Yarway will pay the Settlement Consideration and Yarway Asbestos Claims against the Company Protected Parties will be permanently enjoined. Yarway is anticipated to become a wholly-owned subsidiary of the Yarway Trust and, accordingly, would no longer be owned by or be part of a consolidated group with the Company. As a result of the agreement in principle to settle, the Company recorded a charge of $225 million in Selling, general and administrative expenses in the Consolidated Statement of Operations during the fourth fiscal quarter of 2014.
As a result of filing the voluntary bankruptcy petition during the third quarter of fiscal 2013, the Company recorded an expected loss upon deconsolidation of $10 million related to the Yarway Chapter 11 filing, which continues to represent the Company’s best estimate of its loss.
Other Claims
The Company continuously assesses the sufficiency of its estimated liability for pending and future asbestos claims and defense costs. On a quarterly basis, the Company evaluates actual experience regarding asbestos claims filed, settled and dismissed, amounts paid in settlements, and the recoverability of its insurance assets. If and when data from actual experience demonstrate an unfavorable discernible trend, the Company performs a valuation of its asbestos related liabilities and corresponding insurance assets including a comprehensive review of the underlying assumptions. In addition, the Company evaluates its ability to reasonably estimate claim activity beyond its current look-forward period in order to assess whether such period is appropriate. In addition to claims and litigation experience, the Company considers additional qualitative and quantitative factors such as changes in legislation, the legal environment, the Company’s strategy in managing claims and obtaining insurance, including its defense strategy, and health related trends in the overall population of individuals potentially exposed to asbestos. The Company evaluates all of these factors and determines whether a change in the estimate of its liability for pending and future claims and defense costs or insurance assets is warranted.
During the fourth quarter of fiscal 2014, the Company concluded that an unfavorable trend had developed in actual claim filing activity compared to projected claim filing activity established during the Company’s most recent valuation. Accordingly, the Company, with the assistance of independent actuarial service providers, performed a revised valuation of its asbestos-related liabilities and corresponding insurance assets. As part of the revised valuation, the Company assessed whether a change in its look-forward period was appropriate, taking into consideration its more extensive history and experience with asbestos-related claims and litigation (including its experience with Yarway), and determined that it was possible to make a reasonable estimate of the actuarially determined ultimate risk of loss for pending and unasserted potential future asbestos-related claims through 2056. In connection with the revised valuation, the Company considered a recent settlement with one of its insurers calling for the establishment of a qualified settlement fund, and the results of a separate independent actuarial consulting firm report conducted in the fourth quarter to assist the Company in obtaining insurance to fully fund all estimable asbestos-related claims (excluding Yarway claims) incurred through 2056.
The independent actuarial service firm calculated a total estimated liability for asbestos-related claims of the Company, which reflects the Company’s best estimate of its ultimate risk of loss to resolve all pending and future claims (excluding Yarway claims) through 2056, which is the Company’s reasonable best estimate of the actuarially determined time period through which asbestos-related claims will be filed against Company affiliates.
In conjunction with determining the total estimated liability, the Company retained an independent third party to assist it in valuing its insurance assets responsive to asbestos-related claims, excluding Yarway claims. These insurance assets represent amounts due to the Company for previously settled claims and the probable reimbursements relating to its total liability for pending and unasserted potential future asbestos claims and defense costs. In calculating this amount, the Company used the estimated asbestos liability for pending and projected future claims and defense costs described above, and it also considered the amount of insurance available, the solvency risk with respect to the Company's insurance carriers, resolution of insurance coverage issues, gaps in coverage, allocation methodologies, and the terms of existing settlement agreements with insurance carriers.
The amounts recorded by the Company for asbestos-related liabilities and insurance-related assets are based on the Company's strategies for resolving its asbestos claims, currently available information, and a number of estimates and assumptions. Key variables and assumptions include the number and type of new claims that are filed each year, the average cost of resolution of claims, the identity of defendants, the resolution of coverage issues with insurance carriers, amount of insurance, and the solvency risk with respect to the Company's insurance carriers. Many of these factors are closely linked, such that a change in one variable or assumption will impact one or more of the others, and no single variable or assumption predominately influences the determination of the Company's asbestos-related liabilities and insurance-related assets. Furthermore, predictions with respect to these variables are subject to greater uncertainty in the later portion of the projection

24
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


period. Other factors that may affect the Company's liability and cash payments for asbestos-related matters include uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, reforms of state or federal tort legislation and the applicability of insurance policies among subsidiaries. As a result, actual liabilities or insurance recoveries could be significantly higher or lower than those recorded if assumptions used in the Company's calculations vary significantly from actual results.
In connection with the foregoing, during the third quarter of fiscal 2014, the Company resolved disputes with certain of its historical insurers and agreed that certain insurance proceeds would be used to establish and fund a qualified settlement fund (“QSF”), within the meaning of the Internal Revenue Code, which would be used for the resolution primarily of Grinnell asbestos liabilities of the Company. It is intended that the QSF will receive future insurance payments and proceeds from third party insurers and, in addition, will fund and manage liabilities for certain historical operations of the Company. 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 a subsidiary of 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 during the quarter ended December 26, 2014 from historic third-party insurers in settlement of coverage disputes) to the structure. As part of the restructuring, subsidiaries in the structure assumed certain liabilities related to historic Grinnell, Scott and Figgie operations, including all historical Grinnell asbestos liabilities, and such subsidiaries purchased additional insurance by, through or from a wholly-owned subsidiary in the structure in order to supplement and enhance existing insurance assets. The structure and the QSF fully fund all historic Grinnell asbestos liabilities and provide for the efficient and streamlined management of claims related thereto.

The Company consolidates the qualified settlement fund and related entities that were established for the purpose of managing and resolving the liabilities described above. Although the entities in the dedicated structure serve the specific purpose of managing certain liabilities, each entity in the structure is a wholly-owned indirect subsidiary of the Company, and therefore is required to be consolidated under U.S. generally accepted accounting principles.

Tax Matters

Tyco and its subsidiaries' income tax returns are examined periodically by various tax authorities. In connection with these examinations, tax authorities, including the IRS, have raised issues and proposed tax adjustments, in particular with respect to years preceding the 2007 Separation. The issues and proposed adjustments related to such years are generally subject to the sharing provisions of a tax sharing agreement entered in 2007 with Medtronic and TE Connectivity (the "2007 Tax Sharing Agreement") under which Tyco, Medtronic and TE Connectivity share 27%, 42% and 31%, respectively, of shared income tax liabilities that arise from adjustments made by tax authorities to Tyco's, Medtronic's and TE Connectivity's U.S. and certain non-U.S. income tax returns. The costs and expenses associated with the management of these shared tax liabilities are generally shared equally among the parties. Tyco has previously disclosed that in connection with U.S. federal tax audits, the IRS has raised a number of issues and proposed tax adjustments for periods beginning with the 1997 tax year. Although Tyco has been able to resolve substantially all of the issues and adjustments proposed by the IRS for tax years through 2007, it has not been able to resolve matters related to the treatment of certain intercompany debt transactions during the period. As a result, on June 20, 2013, Tyco received Notices of Deficiency from the IRS asserting that several of Tyco's former U.S. subsidiaries owe additional taxes of $883.3 million plus penalties of $154 million based on audits of the 1997 through 2000 tax years of Tyco and its subsidiaries as they existed at that time. In addition, Tyco received Final Partnership Administrative Adjustments for certain U.S. partnerships owned by former U.S. subsidiaries with respect to which an additional tax deficiency of approximately $30 million has been asserted. These amounts exclude interest and do not reflect the impact on subsequent periods if the IRS position described below is ultimately proved correct.
The IRS asserted in the Notices of Deficiency that substantially all of Tyco's intercompany debt originated during the 1997 - 2000 period should not be treated as debt for U.S. federal income tax purposes, and has disallowed interest and related deductions recognized on U.S. income tax returns totaling approximately $2.9 billion. Tyco strongly disagrees with the IRS position and has filed petitions with the U.S. Tax Court contesting the IRS proposed adjustments. A trial date has been set for October 2016. Tyco believes that it has meritorious defenses for its tax filings, that the IRS positions with regard to these matters are inconsistent with the applicable tax laws and existing Treasury regulations, and that the previously reported taxes for the years in question are appropriate.
No payments with respect to these matters would be required until the dispute is definitively resolved, which, based on the experience of other companies, could take several years. Tyco believes that its income tax reserves and the liabilities recorded in the Consolidated Balance Sheet for the tax sharing agreements continue to be appropriate. However, the ultimate resolution

25
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


of these matters, and the impact of that resolution, are uncertain and could have a material impact on Tyco's financial condition, results of operations and cash flows. In particular, if the IRS is successful in asserting its claim, it would have an adverse impact on interest deductions related to the same intercompany debt in subsequent time periods, totaling approximately $6.6 billion, which is expected to be disallowed by the IRS.
See Note 6 for additional information related to income tax matters.
Other Matters
As previously disclosed, SimplexGrinnell LP (“SG”), a subsidiary of the Company in the North America Installation & Services segment, has been named as a defendant in lawsuits in several jurisdictions seeking damages for SG’s alleged failure to pay prevailing wages and for other pay-related claims. Through the first quarter of fiscal 2015, the Company had recorded a total of approximately $17 million in charges related to these lawsuits, which was recorded in the Cost of services within the Consolidated Statement of Operations. During the quarter ended March 27, 2015, the Company agreed in principle to settle all outstanding lawsuits for a total of approximately $14 million.
During the first quarter of fiscal 2015, the Company received and responded to inquiries from the U.S. Department of the Navy regarding the formulation of certain aqueous film forming foam ("AFFF") concentrates. The Company investigated such matters and ceased selling certain AFFF and other foam products pending the outcome of its investigation. During the course of the investigation, three AFFF products were removed from the Navy’s Qualified Products List ("QPL"); one AFFF product remains on the QPL. The Company has shared the results of its investigation with appropriate governmental authorities and is also communicating with the government regarding the re-qualification of these products. The government has confirmed that it considers the Company to be “presently responsible,” and that no suspension or debarment is warranted. At this time, we cannot predict the outcome of these inquiries and whether this will result in further action by the Navy or other governmental authorities, but it is possible that the Company could be required to pay material fines, consent to injunctions on future conduct, or suffer other criminal or civil penalties or adverse impacts, including being subject to lawsuits brought by private litigants.

In addition to the foregoing, the Company is subject to claims and suits, including from time to time, contractual disputes and product and general liability claims, incidental to present and former operations, acquisitions and dispositions. With respect to many of these claims, the Company either self-insures or maintains insurance through third-parties, with varying deductibles. While the ultimate outcome of these matters cannot be predicted with certainty, the Company believes that the resolution of any such proceedings, whether the underlying claims are covered by insurance or not, will not have a material adverse effect on the Company's financial condition, results of operations or cash flows beyond amounts recorded for such matters.
12.    Retirement Plans
Defined Benefit Pension Plans—The Company sponsors a number of pension plans. The following disclosures exclude the impact of plans which are immaterial individually and in the aggregate. The net periodic benefit cost for the Company's material U.S. and non-U.S. defined benefit pension plans is as follows ($ in millions):
 
U.S. Plans
 
For the Quarters Ended
 
For the Nine Months Ended
 
June 26, 2015
 
June 27, 2014
 
June 26, 2015
 
June 27, 2014
Service cost
$
2

 
$
2

 
$
6

 
$
6

Interest cost
9

 
10

 
27

 
28

Expected return on plan assets
(14
)
 
(14
)
 
(42
)
 
(38
)
Amortization of net actuarial loss
3

 
3

 
7

 
7

Net periodic benefit cost
$
—

 
$
1

 
$
(2
)
 
$
3


26
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 
Non-U.S. Plans
 
For the Quarters Ended
 
For the Nine Months Ended
 
June 26, 2015
 
June 27, 2014
 
June 26, 2015
 
June 27, 2014
Service cost
$
2

 
$
2

 
$
7

 
$
7

Interest cost
14

 
13

 
40

 
41

Expected return on plan assets
(19
)
 
(17
)
 
(58
)
 
(55
)
Amortization of net actuarial loss
3

 
3

 
10

 
9

Net periodic benefit cost
$
—

 
$
1

 
$
(1
)
 
$
2

The estimated net actuarial loss for U.S. pension benefit plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the current fiscal year is expected to be $9 million, and the amount for non-U.S. pension benefit plans is expected to be $14 million. Amortization of net periodic benefit cost from accumulated other comprehensive loss for the Company's pension benefit plans is recorded in Selling, general and administrative expenses, Cost of product sales, or Cost of services in the Consolidated Statements of Operations, depending on the employee job classification.
The Company's funding policy is to make contributions in accordance with the laws and customs of the various countries in which it operates and to make discretionary voluntary contributions from time to time. The Company anticipates that it will contribute at least the minimum required to its pension plans in fiscal year 2015 of $13 million for U.S. plans and $23 million for non-U.S. plans. During the quarter ended June 26, 2015, the Company made required contributions of $5 million to its U.S. pension plans and $4 million to its non-U.S. pension plans. During the nine months ended June 26, 2015, the Company made required contributions of $9 million to its U.S. pension plans and $13 million to its non-U.S. pension plans.
Postretirement Benefit Plans—Net periodic postretirement benefit cost was not material for both periods.
13.    Equity and Comprehensive Income
Authorized Share Capital
As a result of the Merger, the Company’s authorized share capital changed. The authorized share capital of Tyco Ireland is $11,000,000 and €40,000, divided into 1,000,000,000 ordinary shares with a par value of $0.01 per share, 100,000,000 preferred shares with a par value of $0.01 per share and 40,000 ordinary A shares with a par value of €1.00 per share. The authorized share capital includes 40,000 ordinary A shares with a par value of €1.00 per share in order to satisfy statutory requirements for the incorporation of all Irish public limited companies. Tyco Ireland may issue shares subject to the maximum prescribed by its authorized share capital contained in its memorandum of association. In connection with the Merger, Tyco Ireland canceled all the outstanding treasury shares, including shares held by subsidiaries, with an offsetting reduction in Additional paid in capital.
Issued Share Capital
Tyco Ireland issued one ordinary share in exchange for each common share of Tyco Switzerland to the former shareholders of Tyco Switzerland. All Tyco Ireland ordinary shares issued at the effective time of the Merger were issued as fully paid-up and non-assessable.
Dividends
On June 4, 2015, the Company declared a quarterly dividend of $0.205 per share, payable on August 19, 2015 to shareholders of record on July 24, 2015. On March 4, 2015, the Company declared a quarterly dividend of $0.205 per share payable on May 20, 2015 to shareholders of record on April 24, 2015.
On March 5, 2014, the Company's shareholders approved an annual cash dividend of $0.72 per ordinary share. Payment of the dividend was made in four quarterly installments of $0.18 from May 2014 through February 2015. As a result, during the quarter ended March 28, 2014, the Company recorded an accrued dividend of $332 million within Accrued and other current liabilities and a corresponding reduction to Additional paid in capital on the Company's Consolidated Balance Sheet.

27
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The timing, declaration and payment of future dividends to holders of our ordinary shares will be determined by the Company's Board of Directors and will depend upon many factors, including Tyco's financial condition and results of operations, the capital requirements of the Company's businesses, industry practice and any other relevant factors.
Under Irish law, dividends may only be paid (and share repurchases and redemptions must generally be funded) out of “distributable reserves.” The creation of distributable reserves of Tyco Ireland was accomplished by way of a capital reduction of Tyco Ireland, which the Irish High Court approved on December 18, 2014.
Share Repurchase Program
The Company's Board of Directors approved $1.75 billion and $1 billion share repurchase programs in March 2014 and September 2014, respectively. During the nine months ended June 26, 2015, the Company repurchased a total of approximately 10 million shares for approximately $417 million which completed the $1.75 billion share repurchase program, all of which occurred during the quarter ended December 26, 2014. As of June 26, 2015, a total of approximately $1 billion in share repurchase authority remained outstanding.
During the quarter ended June 27, 2014, the Company repurchased a total of approximately 13 million shares for approximately $556 million. During the nine months ended June 27, 2014, the Company repurchased a total of approximately 20 million shares for approximately $806 million.
Comprehensive Income (Loss)
Comprehensive income (loss) is comprised of the following ($ in millions):
 
For the Quarters Ended
 
For the Nine Months Ended
 
June 26,
2015
 
June 27,
2014
 
June 26,
2015
 
June 27,
2014
Net income
$
156

 
$
1,452

 
$
482

 
$
1,931

Foreign currency translation (1)
25

 
68

 
(349
)
 
16

Liquidation of foreign entities (2)
3

 
(40
)
 
3

 
(40
)
Foreign currency translation
28

 
28

 
(346
)
 
(24
)
Amortization of net actuarial losses (3)
6

 
11

 
17

 
21

Income tax expense
(2
)
 
(2
)
 
(4
)
 
(5
)
Defined benefit and post retirement plans, net of tax
4

 
9

 
13

 
16

Unrealized loss on marketable securities and derivative instruments (4)
(6
)
 
(1
)
 
(6
)
 
(1
)
Income tax benefit
2

 
1

 
2

 
1

Unrealized loss on marketable securities and derivative instruments, net of tax
(4
)
 
—

 
(4
)
 
—

  Total other comprehensive income (loss), net of tax
28

 
37

 
(337
)
 
(8
)
Comprehensive income
184

 
1,489

 
145

 
1,923

Less: comprehensive income (loss) attributable to noncontrolling interests
—

 
2

 
(3
)
 
4

Comprehensive income attributable to Tyco ordinary shareholders
$
184

 
$
1,487

 
$
148

 
$
1,919

(1) Includes a $12 million loss and $8 million gain related to the net investment hedge for the quarter and nine months ended June 26, 2015, respectively. The Company did not hold this net investment hedge in fiscal year 2014.
(2) During both the quarter and nine months ended June 26, 2015, $3 million of cumulative translation losses were transferred from foreign currency translation and included in (Loss) income from discontinued operations in the Consolidated Statements of Operations as a result of the sale of foreign entities. During both the quarter and nine months ended June 27, 2014, $40 million of cumulative translation gains were transferred from foreign currency translation and included in (Loss) income from discontinued operations in the Consolidated Statements of Operations as a result of the sale of foreign entities.

28
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


(3) Reclassified to net periodic benefit cost. See Note 12 Retirement Plans for additional information. During the quarter ended June 27, 2014, $5 million of net actuarial losses were transferred from amortization of net actuarial losses and included in (Loss) income from discontinued operations in the Consolidated Statements of Operations as a result of the sale of foreign entities. There was no transfer in fiscal 2015.
(4) Reclassified realized gain (loss) on marketable securities and derivative instruments to Other income (expense), net.
A summary of the changes in each component of Accumulated other comprehensive loss, net of tax, for the nine months ended June 26, 2015 and June 27, 2014 are as follows ($ in millions):
 
Currency
Translation
Adjustments
 
Unrealized Gain
(Loss) on
Marketable
Securities and
Derivative
Instruments
 
Retirement
Plans
 
Accumulated Other
Comprehensive Loss
Balance as of September 26, 2014
$
(693
)
 
$
—

 
$
(532
)
 
$
(1,225
)
Other comprehensive loss before reclassifications
(349
)
 
—

 
—

 
(349
)
  Amounts reclassified from accumulated other comprehensive income, net of tax
3

 
(4
)
 
13

 
12

Balance as of June 26, 2015
$
(1,039
)
 
$
(4
)
 
$
(519
)
 
$
(1,562
)
 
Currency
Translation
Adjustments
 
Unrealized Gain
(Loss) on
Marketable
Securities and
Derivative
Instruments
 
Retirement
Plans
 
Accumulated Other
Comprehensive Loss
Balance as of September 27, 2013
$
(519
)
 
$
—

 
$
(468
)
 
$
(987
)
Other comprehensive income before reclassifications
16

 
—

 
—

 
16

  Amounts reclassified from accumulated other comprehensive
  income, net of tax
(40
)
 
—

 
16

 
(24
)
Balance as of June 27, 2014
$
(543
)
 
$
—

 
$
(452
)
 
$
(995
)
14.    Share Plans
During the quarter ended December 26, 2014, the Company issued its annual share-based compensation grants. The total number of awards issued was approximately 2.4 million, of which 1.5 million were stock options, 0.4 million were restricted unit awards and 0.5 million were performance share unit awards. The options and restricted stock units vest in equal annual installments over a period of 4 years, and the performance share unit awards vest after a period of 3 years based on the level of attainment of the applicable performance metrics, which are determined by the Compensation and Human Resources Committee of the Board. The weighted-average grant-date fair value of the stock options, restricted unit awards and performance share unit awards was $11.77, $43.38 and $42.95, respectively. The weighted-average assumptions used in the Black-Scholes option pricing model included an expected stock price volatility of 32%, a risk free interest rate of 1.83%, an expected annual dividend per share of $0.72 and an expected option life of 5.57 years.
The fair value of restricted stock units is determined based on the closing market price of the Company’s shares on the grant date. Performance share units, which are restricted share awards that vest dependent upon attainment of various levels of performance that equal or exceed targeted levels generally vest in their entirety 3 years from the grant date. The fair value of performance share units is determined based on the Monte Carlo valuation model. The compensation expense recognized for all restricted share awards is net of estimated forfeitures.

29
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


15.    Consolidated Segment Data
Segment information is consistent with how management reviews the businesses, makes investing and resource allocation decisions and assesses operating performance. Selected information by segment is presented in the following tables ($ in millions):
 
For the Quarters Ended
 
For the Nine Months Ended
 
June 26, 2015
 
June 27, 2014
 
June 26, 2015
 
June 27, 2014
Net revenue(1):
 
 
 
 
 
 
 
NA Installation & Services
$
972

 
$
968

 
$
2,867

 
$
2,864

ROW Installation & Services
842

 
999

 
2,605

 
2,902

Global Products
675

 
693

 
1,925

 
1,863

 
$
2,489

 
$
2,660

 
$
7,397

 
$
7,629

_____________________________________________________________________________

(1) 
Net revenue by operating segment excludes intercompany transactions.
 
For the Quarters Ended
 
For the Nine Months Ended
 
June 26, 2015
 
June 27, 2014
 
June 26, 2015
 
June 27, 2014
Operating income (loss):
 
 
 
 
 
 
 
NA Installation & Services
$
160

 
$
117

 
$
384

 
$
333

ROW Installation & Services (1)
57

 
102

 
187

 
310

Global Products
108

 
136

 
316

 
329

Corporate and Other (2)
(72
)
 
(58
)
 
(214
)
 
(73
)
 
$
253

 
$
297

 
$
673

 
$
899

_____________________________________________________________________________

(1) 
Operating income for the nine months ended June 27, 2014 includes $21 million of an insurance recovery related to the improper recording of revenue in China that was previously disclosed in the fourth quarter of fiscal 2012.
(2) 
Operating loss for the nine months ended June 27, 2014 includes $96 million of income related to the settlement of a legacy legal matter with former management and $16 million of income related to the CIT settlement.
16.    Inventory
Inventories consisted of the following ($ in millions):
 
As of
 
June 26,
2015
 
September 26,
2014
Purchased materials and manufactured parts
$
184

 
$
159

Work in process
85

 
85

Finished goods
421

 
381

Inventories
$
690

 
$
625

Inventories are recorded at the lower of cost (primarily first-in, first-out) or market value.

30
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


17.    Property, Plant and Equipment
Property, plant and equipment consisted of the following ($ in millions):
 
As of
 
June 26, 2015
 
September 26, 2014
Land
$
33

 
$
36

Buildings
416

 
411

Subscriber systems
2,008

 
2,210

Machinery and equipment
1,280

 
1,265

Construction in progress
94

 
90

Accumulated depreciation
(2,616
)
 
(2,750
)
Property, plant and equipment, net
$
1,215

 
$
1,262

18.    Guarantees
Certain of the Company's subsidiaries at the business segment level have guaranteed the performance of third-parties and provided financial guarantees for uncompleted work and financial commitments. The terms of these guarantees vary with end dates ranging from the current fiscal year through the completion of such transactions and would typically be triggered in the event of nonperformance. Performance under the guarantees, if required, would not have a material effect on the Company's financial position, results of operations or cash flows.
There are certain guarantees or indemnifications extended among Tyco, Medtronic, TE Connectivity, ADT and Pentair in accordance with the terms of the 2007 and 2012 Separation and Distribution Agreements and Tax Sharing Agreements. These guarantees primarily relate to certain contingent tax liabilities included in the Tax Sharing Agreements. See Note 6.
In addition, Tyco historically provided support in the form of financial and/or performance guarantees to various Medtronic, TE Connectivity, ADT and Tyco Flow Control operating entities. In connection with both the 2012 and 2007 Separations, the Company worked with the guarantee counterparties to cancel or assign these guarantees to Medtronic, TE Connectivity, ADT or Pentair, as appropriate. To the extent these guarantees were not assigned prior to the Separation dates, Tyco remained as the guarantor, but was typically indemnified by the former subsidiary. The Company's obligations related to the 2012 Separation were $3 million, which were included in Other liabilities on the Company's Consolidated Balance Sheets as of both June 26, 2015 and September 26, 2014, with an offset to Tyco's shareholders' equity on the 2012 Separation date. The Company's obligations related to the 2007 Separation were $3 million, which were included in Other liabilities on the Company's Consolidated Balance Sheets as of both June 26, 2015 and September 26, 2014, with an offset to Tyco's shareholders' equity on the 2007 Separation date.
In disposing of assets or businesses, the Company or its subsidiaries often provides representations, warranties and/or indemnities to cover various risks including, for example, unknown damage to the assets, environmental risks involved in the sale of real estate, liability to investigate and remediate environmental contamination at waste disposal sites and manufacturing facilities and unidentified tax liabilities and legal fees related to periods prior to disposition. The Company has no reason to believe that these contingencies, if realized, would have a material adverse effect on the Company's financial position, results of operations or cash flows. The Company has recorded liabilities for known indemnifications included as part of environmental liabilities. See Note 11.
In the normal course of business, the Company is liable for contract completion and product performance. In the opinion of management, such obligations will not significantly affect the Company's financial position, results of operations or cash flows.

31
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The changes in the carrying amount of the Company's warranty accrual from September 26, 2014 to June 26, 2015 were as follows ($ million):
Balance as of September 26, 2014
$
28

Warranties issued
14

Changes in estimates
1

Settlements
(11
)
Currency translation
(1
)
Balance as of June 26, 2015
$
31

Warranty accruals for businesses that are included within Liabilities held for sale on the Consolidated Balance Sheets are excluded from the table above. See Note 3.
19.    Guarantor Financial Statements
TIFSA, a 100% owned subsidiary of the Company, has public debt securities outstanding which are fully and unconditionally guaranteed by Tyco and by Tyco Fire & Security Finance SCA ("TIFSCA"), a wholly owned subsidiary of Tyco and parent company of TIFSA. The following tables present condensed consolidating financial information for Tyco, TIFSCA, TIFSA and all other subsidiaries. Condensed financial information for Tyco, TIFSCA and TIFSA on a stand-alone basis is presented using the equity method of accounting for subsidiaries.


32
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended June 26, 2015
($ in millions)
 
Tyco
International
plc
 
Tyco
Fire & Security
Finance SCA
 
Tyco
International
Finance S.A.
 
Other
Subsidiaries
 
Consolidating
Adjustments
 
Total
Net revenue
$
—

 
$
—

 
$
—

 
$
2,489

 
$
—

 
$
2,489

Cost of product sales
—

 
—

 
—

 
1,025

 
—

 
1,025

Cost of services
—

 
—

 
—

 
548

 
—

 
548

Selling, general and administrative expenses
1

 
—

 
—

 
624

 
—

 
625

Restructuring and asset impairment charges, net
—

 
—

 
—

 
38

 
—

 
38

Operating (loss) income
(1
)
 
—

 
—

 
254

 
—

 
253

Interest income
—

 
—

 
—

 
4

 
—

 
4

Interest expense
—

 
—

 
(25
)
 
(1
)
 
—

 
(26
)
Other income, net
—

 
—

 
1

 
5

 
—

 
6

Equity in net income of subsidiaries
145

 
165

 
166

 
—

 
(476
)
 
—

Intercompany interest and fees
12

 
—

 
23

 
(35
)
 
—

 
—

Income from continuing operations before income taxes
156

 
165

 
165

 
227

 
(476
)
 
237

Income tax expense
—

 
—

 
—

 
(49
)
 
—

 
(49
)
Income from continuing operations
156

 
165

 
165

 
178

 
(476
)
 
188

Loss from discontinued operations, net of income taxes
—

 
—

 
—

 
(32
)
 
—

 
(32
)
Net income
156

 
165

 
165

 
146

 
(476
)
 
156

Net income attributable to Tyco ordinary shareholders
$
156

 
$
165

 
$
165

 
$
146

 
$
(476
)
 
$
156



33
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME
For the Quarter Ended June 26, 2015
($ in millions)
 
Tyco
International
plc
 
Tyco
Fire & Security
Finance SCA
 
Tyco
International
Finance S.A.
 
Other
Subsidiaries
 
Consolidating
Adjustments
 
Total
Net income
$
156

 
$
165

 
$
165

 
$
146

 
$
(476
)
 
$
156

Other comprehensive (loss) income, net of tax
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation
28

 
—

 
(12
)
 
40

 
(28
)
 
28

Defined benefit and post retirement plans
4

 
—

 
—

 
4

 
(4
)
 
4

Unrealized gain on marketable securities and derivative instruments
(4
)
 
—

 
—

 
(4
)
 
4

 
(4
)
Total other comprehensive loss, net of tax
28

 
—

 
(12
)
 
40

 
(28
)
 
28

Comprehensive income
184

 
165

 
153

 
186

 
(504
)
 
184

Less: comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

Comprehensive income attributable to Tyco ordinary shareholders
$
184

 
$
165

 
$
153

 
$
186

 
$
(504
)
 
$
184



34
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended June 27, 2014
($ in millions)
 
Tyco
International
Ltd.
 
Tyco
International
Finance S.A.
 
Other
Subsidiaries
 
Consolidating
Adjustments
 
Total
Net revenue
$
—

 
$
—

 
$
2,660

 
$
—

 
$
2,660

Cost of product sales
—

 
—

 
1,104

 
—

 
1,104

Cost of services
—

 
—

 
571

 
—

 
571

Selling, general and administrative expenses
5

 
1

 
665

 
—

 
671

Separation costs
—

 
—

 
—

 
—

 
—

Restructuring and asset impairment charges, net

—

 
—

 
17

 
—

 
17

Operating (loss) income
(5
)
 
(1
)
 
303

 
—

 
297

Interest income
—

 
—

 
4

 
—

 
4

Interest expense
—

 
(23
)
 
(1
)
 
—

 
(24
)
Other (expense) income, net
(1
)
 
—

 
1

 
—

 
—

Equity in net income of subsidiaries
1,468

 
1,479

 
—

 
(2,947
)
 
—

Intercompany interest and fees
(13
)
 
14

 
(1
)
 
—

 
—

Income from continuing operations before income taxes
1,449

 
1,469

 
306

 
(2,947
)
 
277

Income tax benefit (expense)
1

 
(1
)
 
(55
)
 
—

 
(55
)
Equity income in earnings of unconsolidated subsidiaries
—

 
—

 
215

 
—

 
215

Income from continuing operations
1,450

 
1,468

 
466

 
(2,947
)
 
437

Income from discontinued operations, net of income taxes
—

 
—

 
1,015

 
—

 
1,015

Net income
1,450

 
1,468

 
1,481

 
(2,947
)
 
1,452

Less: noncontrolling interest in subsidiaries net income
—

 
—

 
2

 
—

 
2

Net income attributable to Tyco ordinary shareholders
$
1,450

 
$
1,468

 
$
1,479

 
$
(2,947
)
 
$
1,450



35
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME
For the Quarter Ended June 27, 2014
($ in millions)
 
Tyco
International
Ltd.
 
Tyco
International
Finance S.A.
 
Other
Subsidiaries
 
Consolidating
Adjustments
 
Total
Net income
$
1,450

 
$
1,468

 
$
1,481

 
$
(2,947
)
 
$
1,452

Other comprehensive income, net of tax
 
 
 
 
 
 
 
 
 
Foreign currency translation
28

 
—

 
28

 
(28
)
 
28

Defined benefit and post retirement plans
9

 
—

 
9

 
(9
)
 
9

Total other comprehensive income, net of tax
37

 
—

 
37

 
(37
)
 
37

Comprehensive income
1,487

 
1,468

 
1,518

 
(2,984
)
 
1,489

Less: comprehensive income attributable to noncontrolling interests
—

 
—

 
2

 
—

 
2

Comprehensive income attributable to Tyco ordinary shareholders
$
1,487

 
$
1,468

 
$
1,516

 
$
(2,984
)
 
$
1,487


36
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended June 26, 2015
($ in millions)
 
Tyco
International
plc
 
Tyco
Fire & Security
Finance SCA
 
Tyco
International
Finance S.A.
 
Other
Subsidiaries
 
Consolidating
Adjustments
 
Total
Net revenue
$
—

 
$
—

 
$
—

 
$
7,397

 
$
—

 
$
7,397

Cost of product sales
—

 
—

 
—

 
3,046

 
—

 
3,046

Cost of services
—

 
—

 
—

 
1,645

 
—

 
1,645

Selling, general and administrative expenses
6

 
—

 
1

 
1,918

 
—

 
1,925

Restructuring and asset impairment charges, net
—

 
—

 
—

 
108

 
—

 
108

Operating (loss) income
(6
)
 
—

 
(1
)
 
680

 
—

 
673

Interest income
—

 
—

 
—

 
11

 
—

 
11

Interest expense
—

 
—

 
(73
)
 
(2
)
 
—

 
(75
)
Other income, net

—

 
—

 
3

 
6

 
—

 
9

Equity in net income of subsidiaries
440

 
456

 
453

 
—

 
(1,349
)
 
—

Intercompany interest and fees
51

 
—

 
74

 
(125
)
 
—

 
—

Income from continuing operations before income taxes
485

 
456

 
456

 
570

 
(1,349
)
 
618

Income tax expense
—

 
—

 
—

 
(86
)
 
—

 
(86
)
Income from continuing operations
485

 
456

 
456

 
484

 
(1,349
)
 
532

Loss from discontinued operations, net of income taxes
—

 
—

 
—

 
(50
)
 
—

 
(50
)
Net income
485

 
456

 
456

 
434

 
(1,349
)
 
482

Less: noncontrolling interest in subsidiaries net loss
—

 
—

 
—

 
(3
)
 
—

 
(3
)
Net income attributable to Tyco ordinary shareholders
$
485

 
$
456

 
$
456

 
$
437

 
$
(1,349
)
 
$
485



37
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME
For the Nine Months Ended June 26, 2015
($ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
Tyco
International
plc
 
Tyco
Fire & Security
Finance SCA
 
Tyco
International
Finance S.A.
 
Other
Subsidiaries
 
Consolidating
Adjustments
 
Total
Net income
$
485

 
$
456

 
$
456

 
$
434

 
$
(1,349
)
 
$
482

Other comprehensive (loss) income, net of tax
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation
(346
)
 
—

 
3

 
(349
)
 
346

 
(346
)
Defined benefit and post retirement plans
13

 
—

 
—

 
13

 
(13
)
 
13

Unrealized gain on marketable securities and derivative instruments
(4
)
 
—

 
—

 
(4
)
 
4

 
(4
)
Total other comprehensive (loss) income, net of tax
(337
)
 
—

 
3

 
(340
)
 
337

 
(337
)
Comprehensive income
148

 
456

 
459

 
94

 
(1,012
)
 
145

Less: comprehensive loss attributable to noncontrolling interests
—

 
—

 
—

 
(3
)
 
—

 
(3
)
Comprehensive income attributable to Tyco ordinary shareholders
$
148

 
$
456

 
$
459

 
$
97

 
$
(1,012
)
 
$
148


38
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended June 27, 2014
($ in millions)
 
 
 
 
 
 
 
 
 
 
 
Tyco
International
Ltd.
 
Tyco
International
Finance S.A.
 
Other
Subsidiaries
 
Consolidating
Adjustments
 
Total
Net revenue
$
—

 
$
—

 
$
7,629

 
$
—

 
$
7,629

Cost of product sales
—

 
—

 
3,105

 
—

 
3,105

Cost of services
—

 
—

 
1,721

 
—

 
1,721

Selling, general and administrative expenses
(8
)
 
3

 
1,881

 
—

 
1,876

Separation costs
—

 
—

 
1

 
—

 
1

Restructuring and asset impairment charges, net
—

 
—

 
27

 
—

 
27

Operating income (loss)
8

 
(3
)
 
894

 
—

 
899

Interest income
—

 
—

 
10

 
—

 
10

Interest expense
—

 
(71
)
 
(2
)
 
—

 
(73
)
Other (expense) income, net
(4
)
 
—

 
2

 
—

 
(2
)
Equity in net income of subsidiaries
1,935

 
1,990

 
—

 
(3,925
)
 
—

Intercompany interest and fees
(11
)
 
31

 
(20
)
 
—

 
—

Income from continuing operations before income taxes
1,928

 
1,947

 
884

 
(3,925
)
 
834

Income tax benefit (expense)
1

 
(1
)
 
(164
)
 
—

 
(164
)
Equity income in earnings of unconsolidated subsidiaries
—

 
—

 
206

 
—

 
206

Income from continuing operations
1,929

 
1,946

 
926

 
(3,925
)
 
876

Income from discontinued operations, net of income taxes
(2
)
 
—

 
1,057

 
—

 
1,055

Net income
1,927

 
1,946

 
1,983

 
(3,925
)
 
1,931

Less: noncontrolling interest in subsidiaries net income
—

 
—

 
4

 
—

 
4

Net income attributable to Tyco ordinary shareholders
$
1,927

 
$
1,946

 
$
1,979

 
$
(3,925
)
 
$
1,927




39
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME
For the Nine Months Ended June 27, 2014
($ in millions)
 
 
 
 
 
 
 
 
 
 
 
Tyco
International
Ltd.
 
Tyco
International
Finance S.A.
 
Other
Subsidiaries
 
Consolidating
Adjustments
 
Total
Net income
$
1,927

 
$
1,946

 
$
1,983

 
$
(3,925
)
 
$
1,931

Other comprehensive (loss) income, net of tax
 
 
 
 
 
 
 
 
 
Foreign currency translation
(24
)
 
—

 
(24
)
 
24

 
(24
)
Defined benefit and post retirement plans
16

 
—

 
16

 
(16
)
 
16

Total other comprehensive loss, net of tax
(8
)
 
—

 
(8
)
 
8

 
(8
)
Comprehensive income
1,919

 
1,946

 
1,975

 
(3,917
)
 
1,923

Less: comprehensive income attributable to noncontrolling interests
—

 
—

 
4

 
—

 
4

Comprehensive income attributable to Tyco ordinary shareholders
$
1,919

 
$
1,946

 
$
1,971

 
$
(3,917
)
 
$
1,919



40
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


CONDENSED CONSOLIDATING BALANCE SHEET
As of June 26, 2015
($ in millions)
 
Tyco
International
plc
 
Tyco
Fire & Security
Finance SCA
 
Tyco
International
Finance S.A.
 
Other
Subsidiaries
 
Consolidating
Adjustments
 
Total
Assets
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
—

 
$
—

 
$
—

 
$
531

 
$
—

 
$
531

Accounts receivable, net
—

 
—

 
—

 
1,775

 
—

 
1,775

Inventories
—

 
—

 
—

 
690

 
—

 
690

Intercompany receivables
17

 
—

 
348

 
7,430

 
(7,795
)
 
—

Prepaid expenses and other current assets
1

 
—

 
72

 
747

 
—

 
820

Deferred income taxes
—

 
—

 
—

 
304

 
—

 
304

Assets held for sale
—

 
—

 
—

 
13

 
—

 
13

Total current assets
18

 
—

 
420

 
11,490

 
(7,795
)
 
4,133

Property, plant and equipment, net
—

 
—

 
—

 
1,215

 
—

 
1,215

Goodwill
—

 
—

 
—

 
4,291

 
—

 
4,291

Intangible assets, net
—

 
—

 
—

 
890

 
—

 
890

Investment in subsidiaries
11,033

 
11,275

 
16,040

 
—

 
(38,348
)
 
—

Intercompany loans receivable
—

 
—

 
2,947

 
5,062

 
(8,009
)
 
—

Other assets
1

 
—

 
32

 
1,158

 
—

 
1,191

Total Assets
$
11,052

 
$
11,275

 
$
19,439

 
$
24,106

 
$
(54,152
)
 
$
11,720

Liabilities and Equity
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Loans payable and current maturities of long-term debt
$
—

 
$
—

 
$
258

 
$
19

 
$
—

 
$
277

Accounts payable
1

 
—

 
—

 
743

 
—

 
744

Accrued and other current liabilities
88

 
—

 
79

 
1,829

 
—

 
1,996

Deferred revenue
—

 
—

 
—

 
403

 
—

 
403

Intercompany payables
3,508

 
—

 
3,928

 
359

 
(7,795
)
 
—

Liabilities held for sale
—

 
—

 
—

 
6

 
—

 
6

Total current liabilities
3,597

 
—

 
4,265

 
3,359

 
(7,795
)
 
3,426

Long-term debt
—

 
—

 
1,742

 
2

 
—

 
1,744

Intercompany loans payable
3,151

 
—

 
1,911

 
2,947

 
(8,009
)
 
—

Deferred revenue
—

 
—

 
—

 
313

 
—

 
313

Other liabilities
—

 
—

 
246

 
1,652

 
—

 
1,898

Total Liabilities
6,748

 
—

 
8,164

 
8,273

 
(15,804
)
 
7,381

Redeemable noncontrolling interest
—

 
—

 
—

 
—

 
—

 
—

Tyco Shareholders' Equity:
 
 
 
 
 
 
 
 
 
 
 
Ordinary shares
4

 
—

 
—

 
—

 
—

 
4

Other shareholders' equity
4,300

 
11,275

 
11,275

 
15,798

 
(38,348
)
 
4,300

Total Tyco Shareholders' Equity
4,304

 
11,275

 
11,275

 
15,798

 
(38,348
)
 
4,304

Nonredeemable noncontrolling interest
—

 
—

 
—

 
35

 
—

 
35

Total Equity
4,304

 
11,275

 
11,275

 
15,833

 
(38,348
)
 
4,339

Total Liabilities, Redeemable Noncontrolling Interest and Equity
$
11,052

 
$
11,275

 
$
19,439

 
$
24,106

 
$
(54,152
)
 
$
11,720



41
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


CONDENSED CONSOLIDATING BALANCE SHEET
As of September 26, 2014
($ in millions)
 
Tyco
International
Ltd.
 
Tyco
International
Finance S.A.
 
Other
Subsidiaries
 
Consolidating
Adjustments
 
Total
Assets
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
—

 
$
—

 
$
892

 
$
—

 
$
892

Accounts receivable, net
—

 
—

 
1,734

 
—

 
1,734

Inventories
—

 
—

 
625

 
—

 
625

Intercompany receivables
18

 
245

 
8,102

 
(8,365
)
 
—

Prepaid expenses and other current assets
7

 
62

 
982

 
—

 
1,051

Deferred income taxes
—

 
—

 
304

 
—

 
304

Assets held for sale
—

 
—

 
180

 
—

 
180

Total current assets
25

 
307

 
12,819

 
(8,365
)
 
4,786

Property, plant and equipment, net
—

 
—

 
1,262

 
—

 
1,262

Goodwill
—

 
—

 
4,122

 
—

 
4,122

Intangible assets, net
—

 
—

 
712

 
—

 
712

Investment in subsidiaries
12,738

 
16,207

 
—

 
(28,945
)
 
—

Intercompany loans receivable
—

 
3,693

 
5,346

 
(9,039
)
 
—

Other assets
26

 
4

 
897

 
—

 
927

Total Assets
$
12,789

 
$
20,211

 
$
25,158

 
$
(46,349
)
 
$
11,809

Liabilities and Equity
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
Loans payable and current maturities of long-term debt
$
—

 
$
—

 
$
20

 
$
—

 
$
20

Accounts payable
1

 
—

 
824

 
—

 
825

Accrued and other current liabilities
191

 
23

 
1,900

 
—

 
2,114

Deferred revenue
—

 
—

 
400

 
—

 
400

Intercompany payables
3,517

 
4,593

 
255

 
(8,365
)
 
—

Liabilities held for sale
—

 
—

 
118

 
—

 
118

Total current liabilities
3,709

 
4,616

 
3,517

 
(8,365
)
 
3,477

Long-term debt
—

 
1,441

 
2

 
—

 
1,443

Intercompany loans payable
4,180

 
1,888

 
2,971

 
(9,039
)
 
—

Deferred revenue
—

 
—

 
335

 
—

 
335

Other liabilities
253

 
—

 
1,618

 
—

 
1,871

Total Liabilities
8,142

 
7,945

 
8,443

 
(17,404
)
 
7,126

Redeemable noncontrolling interest
—

 
—

 
13

 
—

 
13

Tyco Shareholders' Equity:
 
 
 
 
 
 
 
 
 
Ordinary shares
208

 
—

 
—

 
—

 
208

Ordinary shares held in treasury
—

 
—

 
(2,515
)
 
—

 
(2,515
)
Other shareholders' equity
4,439

 
12,266

 
19,194

 
(28,945
)
 
6,954

Total Tyco Shareholders' Equity
4,647

 
12,266

 
16,679

 
(28,945
)
 
4,647

Nonredeemable noncontrolling interest
—

 
—

 
23

 
—

 
23

Total Equity
4,647

 
12,266

 
16,702

 
(28,945
)
 
4,670

Total Liabilities, Redeemable Noncontrolling Interest and Equity
$
12,789

 
$
20,211

 
$
25,158

 
$
(46,349
)
 
$
11,809



42
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended June 26, 2015
($ in millions)
 
Tyco
International plc
 
Tyco
Fire & Security
Finance SCA
 
Tyco
International
Finance S.A.
 
Other
Subsidiaries
 
Consolidating
Adjustments
 
Total
Cash Flows From Operating Activities:
 
 
 
 
 
 
 
 
 
 
 
Net cash provided by (used in) operating activities
$
94

 
$
—

 
$
(525
)
 
$
942

 
$
—

 
$
511

Net cash used in discontinued operating activities
—

 
—

 
—

 
(1
)
 
—

 
(1
)
Cash Flows From Investing Activities:
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
—

 
—

 
—

 
(183
)
 
—

 
(183
)
Proceeds from disposal of assets
—

 
—

 
—

 
4

 
—

 
4

Acquisition of businesses, net of cash acquired
—

 
—

 
—

 
(525
)
 
—

 
(525
)
Acquisition of dealer generated customer accounts and bulk account purchases
—

 
—

 
—

 
(13
)
 
—

 
(13
)
Divestiture of businesses, net of cash divested
—

 
—

 
—

 
(1
)
 
—

 
(1
)
Net increase in intercompany loans
—

 
—

 
(41
)
 
—

 
41

 
—

Sales and maturities of investments
—

 
—

 
4

 
279

 
—

 
283

Purchases of investments
—

 
—

 
(1
)
 
(289
)
 
—

 
(290
)
Increase in restricted cash
—

 
—

 
—

 
(27
)
 
—

 
(27
)
Net cash used in investing activities
—

 
—

 
(38
)
 
(755
)
 
41

 
(752
)
Net cash used in discontinued investing activities
—

 
—

 
—

 
(37
)
 
—

 
(37
)
Cash Flows From Financing Activities:
 
 
 
 
 
 
 
 
 
 
 
Proceeds from issuance of short-term debt
—

 
—

 
258

 
—

 
—

 
258

Repayment of short-term debt
—

 
—

 
(258
)
 
(1
)
 
—

 
(259
)
Proceeds from issuance of long-term debt
—

 
—

 
567

 
3

 
—

 
570

Proceeds from exercise of share options
63

 
—

 
—

 
7

 
—

 
70

Dividends paid
(237
)
 
—

 
—

 
—

 
—

 
(237
)
Repurchase of ordinary shares by treasury
—

 
—

 
—

 
(417
)
 
—

 
(417
)
Net intercompany loan borrowings
83

 
—

 
—

 
(42
)
 
(41
)
 
—

Transfer to discontinued operations
—

 
—

 
—

 
(38
)
 
—

 
(38
)
Payment of contingent consideration
—

 
—

 
—

 
(23
)
 
—

 
(23
)
Other
(3
)
 
—

 
(4
)
 
(19
)
 
—

 
(26
)
Net cash (used in) provided by financing activities
(94
)
 
—

 
563

 
(530
)
 
(41
)
 
(102
)
Net cash provided by discontinued financing activities
—

 
—

 
—

 
38

 
—

 
38

Effect of currency translation on cash
—

 
—

 
—

 
(18
)
 
—

 
(18
)
Net decrease in cash and cash equivalents
—

 
—

 
—

 
(361
)
 
—

 
(361
)
Cash and cash equivalents at beginning of period
—

 
—

 
—

 
892

 
—

 
892

Cash and cash equivalents at end of period
$
—

 
$
—

 
$
—

 
$
531

 
$
—

 
$
531



43
TYCO INTERNATIONAL PLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended June 27, 2014
($ in millions)
 
Tyco
International
Ltd.
 
Tyco
International
Finance S.A.
 
Other
Subsidiaries
 
Consolidating
Adjustments
 
Total
Cash Flows From Operating Activities:
 
 
 
 
 
 
 
 
 
Net cash (used in) provided by operating activities
$
(184
)
 
$
455

 
$
247

 
$
—

 
$
518

Net cash provided by discontinued operating activities
—

 
—

 
102

 
—

 
102

Cash Flows From Investing Activities:
 
 
 
 
 
 
 
 
 
Capital expenditures
—

 
—

 
(210
)
 
—

 
(210
)
Proceeds from disposal of assets
—

 
—

 
7

 
—

 
7

Acquisition of businesses, net of cash acquired
—

 
—

 
(63
)
 
—

 
(63
)
Acquisition of dealer generated customer accounts and bulk account purchases
—

 
—

 
(20
)
 
—

 
(20
)
Net increase in intercompany loans
—

 
(446
)
 
—

 
446

 
—

Increase in investment in subsidiaries
(4
)
 
(9
)
 
4

 
9

 
—

Sales and maturities of investments
—

 
—

 
283

 
—

 
283

Purchases of investments
—

 
—

 
(332
)
 
—

 
(332
)
Sale of equity investment
—

 
—

 
250

 
—

 
250

Decrease in restricted cash
—

 
—

 
1

 
—

 
1

Other
—

 
—

 
1

 
—

 
1

Net cash used in investing activities
(4
)
 
(455
)
 
(79
)
 
455

 
(83
)
Net cash provided by discontinued investing activities
—

 
—

 
1,789

 
—

 
1,789

Cash Flows From Financing Activities:
 
 
 
 
 
 
 
 
 
Proceeds from issuance of short-term debt
—

 
830

 
—

 
—

 
830

Repayment of short-term debt
—

 
(830
)
 
(1
)
 
—

 
(831
)
Proceeds from exercise of share options
—

 
—

 
79

 
—

 
79

Dividends paid
(231
)
 
—

 
—

 
—

 
(231
)
Repurchase of ordinary shares by treasury
—

 
—

 
(806
)
 
—

 
(806
)
Net intercompany loan borrowings
419

 
—

 
27

 
(446
)
 
—

Increase in equity from parent
—

 
—

 
9

 
(9
)
 
—

Transfer from discontinued operations
—

 
—

 
1,891

 
—

 
1,891

Other
—

 
—

 
(10
)
 
—

 
(10
)
Net cash provided by financing activities
188

 
—

 
1,189

 
(455
)
 
922

Net cash used in discontinued financing activities
—

 
—

 
(1,891
)
 
—

 
(1,891
)
Effect of currency translation on cash
—

 
—

 
(8
)
 
—

 
(8
)
Net decrease in cash and cash equivalents
—

 
—

 
1,349

 
—

 
1,349

Cash and cash equivalents at beginning of period
—

 
—

 
563

 
—

 
563

Cash and cash equivalents at end of period
$
—

 
$
—

 
$
1,912

 
$
—

 
$
1,912

20.    Subsequent Events
On July 20, 2015, the Company acquired FootFall, a global retail intelligence company, from Experian, plc, for approximately $60 million. FootFall provides retailers and retail property owners with technology, services and analytic solutions related to customer traffic in their stores, and has operations in Europe, Asia Pacific and North America. FootFall will be integrated with the NA Installation & Services and ROW Installation & Services segments.

44

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
The following discussion and analysis of the Company's financial condition and results of operations should be read together with our unaudited Consolidated Financial Statements and the related notes included elsewhere in this Quarterly Report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The Company's actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those under the headings "Risk Factors" and "Forward-Looking Information".
Organization
The unaudited Consolidated Financial Statements include the consolidated results of Tyco International plc and its subsidiaries (hereinafter collectively referred to as "we", the "Company", "Tyco Ireland" or "Tyco"). The financial statements have been prepared in United States dollars ("USD"), in accordance with accounting principles generally accepted in the United States ("GAAP").
References to 2015 and 2014 are to Tyco's fiscal quarters ending June 26, 2015 and June 27, 2014, respectively, unless otherwise indicated. The Company has a 52- or 53-week fiscal year that ends on the last Friday in September. Fiscal years 2015 and 2014 are both 52-week years.
Tyco Ireland was formed as an Irish public limited company and a wholly-owned subsidiary of Tyco International Ltd., a Swiss entity ("Tyco Switzerland") on May 9, 2014. On November 17, 2014, Tyco Switzerland merged with Tyco Ireland, with Tyco Ireland being the surviving company ("the Merger"). This Merger resulted in Tyco Ireland succeeding Tyco Switzerland as the publicly-traded parent company of the Tyco group. Tyco Switzerland's shareholders received one ordinary share of Tyco Ireland for each ordinary share of Tyco Switzerland held immediately prior to the Merger. Tyco Ireland now conducts, through its subsidiaries, the same businesses as conducted by Tyco Switzerland before the Merger.
Upon the effectiveness of the Merger, the ordinary shares of Tyco Ireland were listed on the New York Stock Exchange (“NYSE”) under the symbol “TYC,” the same symbol under which the ordinary shares in Tyco Switzerland were previously listed and traded.
We operate and report financial and operating information in the following three segments:
•
NA Installation & Services designs, sells, installs, services and monitors electronic security systems and fire detection and suppression systems for commercial, industrial, retail, institutional and governmental customers in North America.
•
ROW Installation & Services designs, sells, installs, services and monitors electronic security systems and fire detection and suppression systems for commercial, industrial, retail, residential, small business, institutional and governmental customers in the Rest of World regions.
•
Global Products designs, manufactures and sells fire protection, security and life safety products, including intrusion security, anti-theft devices, breathing apparatus and access control and video management systems, for commercial, industrial, retail, residential, small business, institutional and governmental customers worldwide, including products installed and serviced by our NA and ROW Installation & Services segments.
We also provide general corporate services to our segments which are reported as a fourth, non-operating segment, Corporate and Other. References to the segment data are to the Company's continuing operations.
Certain prior period amounts have been reclassified to conform with current period presentation. During the quarter ended June 26, 2015, the Company sold three businesses in the Rest of World ("ROW") Installation & Services segment. The assets and liabilities related to these businesses were classified as held for sale of as September 26, 2014, and the results of operations of two of these businesses are included in discontinued operations for all periods presented, as the criteria to be presented as a discontinued operation were not satisfied for the third business. The Company expects to complete the sale of another of its ROW Installation & Services businesses during the first half of fiscal 2016. The assets and liabilities of this business are classified as held for sale, and its results of operations are presented as discontinued operations for all periods presented. See Note 3 to our unaudited Consolidated Financial Statements.

45

Business Overview
We are a leading global provider of security products and services, fire detection and suppression products and services and life safety products. We utilize our extensive global footprint of approximately 900 locations, including manufacturing facilities, service and distribution centers, monitoring centers and sales offices, to provide solutions and localized expertise to our global customer base. We provide an extensive range of product and service offerings to over 3 million customers in more than 100 countries through multiple channels. Our revenues are broadly diversified across the United States and Canada (collectively “North America”); Central America and South America (collectively “Latin America”); Europe, the Middle East, and Africa (collectively “EMEA”) and the Asia-Pacific geographic areas. The following chart reflects our net revenue by geographic area for the nine months ended June 26, 2015.
Nine Months Ended June 26, 2015
Net Revenue by Geographic Area
Our end-use customers, to whom we may sell directly or through wholesalers, distributors, commercial builders or contractors, are also broadly diversified and include:
•
Commercial customers, including residential and commercial property developers, financial institutions, food service businesses and commercial enterprises;
•
Industrial customers, including companies in the oil and gas, power generation, mining, petrochemical and other industries;
•
Retail customers, including international, regional and local consumer outlets, from national chains to specialty stores;
•
Institutional customers, including a broad range of healthcare facilities, academic institutions, museums and foundations;
•
Governmental customers, including federal, state and local governments, defense installations, mass transportation networks, public utilities and other government-affiliated entities and applications; and
•
Residential and small business customers outside of North America, including owners of single family homes and local providers of a wide range of goods and services.

46

As a global business with a varied customer base and an extensive range of products and services, our operations and results are impacted by global, regional and industry specific factors, and by political factors. Our geographic diversity and the diversity in our customer base and our products and services has helped mitigate the impact of any one industry or the economy of any single country on our consolidated operating results, financial condition and cash flows. Due to the global nature of our business and the variety of our customers, products and services, no single factor is predominantly used to forecast Company results. Rather, management monitors a number of factors to develop expectations regarding future results, including the activity of key competitors and customers, order rates for longer lead time projects, and capital expenditure budgets and spending patterns of our customers. We also monitor trends throughout the commercial and residential fire and security markets, including building codes and fire-safety standards. Our commercial installation businesses are impacted by trends in commercial construction starts, while our residential business, which is located outside of the United States, is impacted by new housing starts.
Because we are a global business, with approximately 50% of our revenue generated outside the United States, and because our financial statements are prepared in U.S. Dollars, our results of operations are impacted by changes in foreign currency exchange rates. In recent months, the U.S. Dollar has remained strong against the currencies of most of the significant non-U.S. jurisdictions where we operate. The most significant drop has been in the Euro, which decreased to a recent low of approximately EUR 1.05 per 1.00 U.S. Dollar from approximately EUR 1.26 at the beginning of our fiscal year. The significant strengthening of the U.S. Dollar has negatively impacted our revenue and operating income during the first nine months of fiscal 2015 and is expected to continue to do so during the remainder of fiscal 2015. In addition, the Company sells its products and services into the petrochemical, oil and gas market. Revenue from this market vertical is spread across each of the Company’s segments, with the most significant exposure in the United Kingdom in the ROW Installation & Services segment and in the Fire Protection Products business in the Global Products segment. As a result of recent declines in oil prices, this market vertical has seen significant changes in spending patterns, in particular with respect to capital expenditures. Based on activity in the second and third fiscal quarters, the Company expects the revenue tied to this market vertical to be negatively impacted during the fiscal year.
Results of Operations
Consolidated financial information is as follows:
 
For the Quarters Ended
 
For the Nine Months Ended
($ in millions)
June 26,
2015
 
June 27,
2014
 
June 26,
2015
 
June 27,
2014
Net revenue
$
2,489

 
$
2,660

 
$
7,397

 
$
7,629

Net revenue decline
(6.4
)%
 
N/A

 
(3.0
)%
 
N/A

Organic revenue (decline) growth
(1.1
)%
 
N/A

 
1.2
 %
 
N/A

Operating income
$
253

 
$
297

 
$
673

 
$
899

Operating margin
10.2
 %
 
11.2
%
 
9.1
 %
 
11.8
%
Interest income
$
4

 
$
4

 
$
11

 
$
10

Interest expense
(26
)
 
(24
)
 
(75
)
 
(73
)
Other income (expense), net
6

 
—

 
9

 
(2
)
Income tax expense
(49
)
 
(55
)
 
(86
)
 
(164
)
Equity income in earnings of unconsolidated subsidiaries
—

 
215

 
—

 
206

Income from continuing operations attributable to Tyco ordinary shareholders
188

 
435

 
535

 
872

Net Revenue
Net revenue for the quarter ended June 26, 2015 decreased by $171 million, or 6.4%, to $2,489 million as compared to net revenue of $2,660 million for the quarter ended June 27, 2014. Changes in foreign currency exchange rates had an unfavorable impact of $183 million, or 6.9%, on net revenue, primarily in our ROW Installation & Services segment, and to a lesser extent, in our Global Products segment. On an organic basis, net revenue declined by $30 million, or 1.1%, year over year, primarily as a result of declines in our Global Products and ROW Installation & Services segments, partially offset by revenue growth in our NA Installation & Services segment. Net revenue was favorably impacted by acquisitions that contributed $63 million, or 2.4%, primarily within our Global Products and ROW Installation & Services segment.
Net revenue for the nine months ended June 26, 2015 decreased by $232 million, or 3.0%, to $7,397 million as compared to net revenue of $7,629 million for the nine months ended June 27, 2014. Changes in foreign currency exchange rates had an

47

unfavorable impact of $421 million, or 5.5%, on net revenue, primarily in our ROW Installation & Services segment, and to a lesser extent, in our Global Products and NA Installation & Services segments. Net revenue was also unfavorably impacted by divestitures of $34 million, or 0.4%, in our ROW Installation & Services segment, but was partially offset by the favorable impact of acquisitions, which contributed $133 million, or 1.7%, within our ROW Installation & Services and Global Products segments. On an organic basis, net revenue grew by $90 million, or 1.2%, year over year, primarily as a result of revenue growth in our Global Products segment.
Cost of Revenue
The significant components of cost of product sales include material costs, labor and overhead costs, product shipping and warehousing costs. The significant components of cost of services include labor and employee related costs, depreciation expense, costs associated with our equipment and fleet of vehicles, telecommunication costs and material costs. The significant components of SG&A include compensation and compensation related costs, facility and maintenance expenses and professional fees.
Operating Income
Operating income for the quarter ended June 26, 2015 decreased by $44 million, or 14.8%, to $253 million, as compared to operating income of $297 million for the quarter ended June 27, 2014. This decline is primarily due to a $35 million increase in restructuring and repositioning charges as compared to the prior year period. In addition, changes in foreign currency exchange rates had an unfavorable impact on operating income of $10 million. These items were offset by benefits from sourcing, productivity and restructuring activities as well as an $11 million decrease in separation costs.
Operating income for the nine months ended June 26, 2015 decreased by $226 million, or 25.1%, to $673 million, as compared to operating income of $899 million for the nine months ended June 27, 2014. This decline is primarily due to a reversal of a compensation reserve of $92 million for the settlement of legacy litigation with former management, a non-recurring $21 million insurance recovery, and a gain of $16 million related to a legal settlement with CIT Group in the comparable period. Operating income was also unfavorably impacted by a $114 million increase in restructuring and repositioning charges, as well as a $21 million increase in loss on divestitures. In addition, changes in foreign currency exchange rates had an unfavorable impact on operating income of $34 million. These items were offset by benefits from sourcing, productivity and cost-containment initiatives, and restructuring activities as well as a $40 million decrease in separation costs.
Key items impacting operating income for the quarters and nine months ended June 26, 2015 and June 27, 2014, respectively, are as follows:
 
For the Quarters Ended
 
For the Nine Months Ended
($ in millions)
June 26,
2015
 
June 27,
2014
 
June 26,
2015
 
June 27,
2014
Legacy legal gains
$
(2
)
 
$
(4
)
 
$
(8
)
 
$
(96
)
CIT settlement gain
—

 
—

 
—

 
(16
)
Separation costs
—

 
11

 
2

 
42

Loss on sale of investment
—

 
—

 
—

 
7

Restructuring and repositioning charges, net
65

 
30

 
169

 
55

(Gain) loss on divestitures
(4
)
 
—

 
19

 
(2
)
China insurance recovery
—

 
—

 
—

 
(21
)
Asbestos related charges (gains)
1

 
(6
)
 
7

 
(5
)
Impact of foreign currency
10

 
2

 
34

 
11

We continue to identify and pursue opportunities for cost savings through restructuring activities and workforce reductions to improve operating efficiencies across our businesses. Additionally, we initiated certain global actions designed to reduce our cost structure and improve future profitability by streamlining operations and better aligning functions, which we refer to as repositioning actions. The Company expects to incur approximately $225 million of restructuring and repositioning charges in fiscal 2015. See Note 4 to our unaudited Consolidated Financial Statements.

48

Interest Income and Expense
Interest income was $4 million for both quarters ended June 26, 2015 and June 27, 2014. Interest income was $11 million and $10 million for the nine months ended June 26, 2015 and June 27, 2014, respectively.
Interest expense was $26 million and $24 million for the quarters ended June 26, 2015 and June 27, 2014, respectively. Interest expense was $75 million and $73 million for the nine months ended June 26, 2015 and June 27, 2014, respectively.
Other Income (Expense), net
Other income of $6 million for the quarter ended June 26, 2015 was primarily comprised of a $5 million gain related to the sale of assets, as well as an unrealized gain on trading securities. Other income was nil for the quarter ended June 27, 2014.
Other income of $9 million for the nine months ended June 26, 2015 was primarily comprised of a $5 million gain related to the sale of assets, as well as an unrealized gain on trading securities, partially offset by a net loss related to the 2012 Tax Sharing Agreement. Other expense of $2 million for the nine months ended June 27, 2014 primarily related to a net loss on the 2012 Tax Sharing Agreement activity.
Effective Income Tax Rate
Our effective income tax rate was 20.7% and 19.9% during the quarters ended June 26, 2015 and June 27, 2014, respectively. The current period rate represents the Company's geographic mix of income and non-recurring tax charges.
Our effective income tax rate was 13.9% and 19.7% during the nine months ended June 26, 2015 and June 27, 2014, respectively. The decrease in our effective tax rate in the current period was primarily due to a decrease in valuation allowances on the basis of management's reassessment of the amount of its deferred tax assets that are more likely than not to be realized resulting from the impact of restructuring actions and tax law changes in a non-U.S. jurisdiction. In addition, income from a non-recurring reversal of a compensation reserve established in respect of legacy litigation with former management generated increased tax expense during the prior period.
The rate can vary from quarter to quarter due to discrete items, such as the settlement of income tax audits and changes in tax laws, as well as recurring factors such as the geographic mix of income before taxes.  The Company has operations and a taxable presence in nearly 60 countries outside the U.S.  All of these countries have a tax rate that is lower than the rate in the U.S.  The countries in which the Company has a material presence that have lower tax rates compared to the U.S. include Canada, Australia, Ireland, Germany, Switzerland and the United Kingdom.  The Company's ability to obtain a benefit from lower tax rates outside the U.S. is dependent on its relative levels of income in countries outside the U.S. and on the statutory tax rates and tax laws in these countries.  Based on the dispersion of the Company's non-U.S. income and management’s assessment of the likelihood and magnitude of any potential change to statutory tax rates or tax laws affecting the Company, any such changes are not expected to materially affect the Company's income tax provision or net income, aside from any one-time adjustment to reflect the impact of the change in the tax rate to the Company's deferred tax balances. 
Equity Gain in Earnings of Unconsolidated Subsidiaries
Equity gain in earnings of unconsolidated subsidiaries of $215 million and $206 million for the quarter and nine months ended June 27, 2014, respectively, reflects our share of Atkore International Group Inc.'s ("Atkore") net gain or loss, which was accounted for under the equity method of accounting. On April 9, 2014, Atkore redeemed all of our common equity stake in Atkore.

49

Segment Results
The following chart reflects our net revenue by operating segment, as well as the percent of net revenue by operating segment, for the quarters and nine months ended June 26, 2015 and June 27, 2014, respectively.
The segment discussions that follow describe the significant factors contributing to the changes in results for each of our segments included in continuing operations.
NA Installation & Services
Financial information for NA Installation & Services for the quarters and nine months ended June 26, 2015 and June 27, 2014 is as follows:
 
For the Quarters Ended
 
For the Nine Months Ended
($ in millions)
June 26,
2015
 
June 27,
2014
 
June 26,
2015
 
June 27,
2014
Net revenue
$
972

 
$
968

 
$
2,867

 
$
2,864

Net revenue growth
0.4
%
 
N/A

 
0.1
%
 
N/A

Organic revenue growth
1.3
%
 
N/A

 
0.9
%
 
N/A

Operating income
$
160

 
$
117

 
$
384

 
$
333

Operating margin
16.5
%
 
12.1
%
 
13.4
%
 
11.6
%

50

Net Revenue
The change in net revenue compared to the prior periods is attributable to the following:
Factors Contributing to Year-Over-Year Change
 
Third Quarter
Fiscal 2015
Compared to
Third Quarter
Fiscal 2014
 
Year to Date Fiscal 2015 Compared to Year to Date Fiscal 2014
Organic revenue growth
 
$
13

 
$
27

Acquisitions
 
3

 
9

Impact of foreign currency
 
(12
)
 
(33
)
Total change
 
$
4

 
$
3

Net revenue increased $4 million, or 0.4%, to $972 million for the quarter ended June 26, 2015 as compared to $968 million for the quarter ended June 27, 2014. On an organic basis, net revenue grew by 1.3% from the comparable quarter, with growth in installation revenue, while service revenue remained unchanged. Net revenue was also favorably impacted by $3 million, or 0.3%, due to several small acquisitions made during the first six months of fiscal 2015. Changes in foreign currency exchange rates unfavorably impacted net revenue by $12 million, or 1.2%.
Net revenue increased $3 million, or 0.1%, to $2,867 million for the nine months ended June 26, 2015 as compared to $2,864 million for the nine months ended June 27, 2014. Changes in foreign currency exchange rates unfavorably impacted net revenue by $33 million, or 1.2%. On an organic basis, net revenue grew by 0.9% from the comparable period, as service revenue increased and installation revenue was flat. Net revenue was favorably impacted by $9 million, or 0.3%, due to the acquisition of Westfire in the first quarter of fiscal 2014 and several small acquisitions made during the first six months of fiscal 2015.
Operating Income
Operating income for the quarter ended June 26, 2015 increased $43 million, or 36.8%, to $160 million, as compared to operating income of $117 million for the quarter ended June 27, 2014. This increase was primarily due to an $11 million decline in separation costs, a decline of $9 million in restructuring and repositioning activities, and cost-containment initiatives during the quarter. Operating income for the quarter also benefited from previous productivity and restructuring actions.
Operating income for the nine months ended June 26, 2015 increased $51 million, or 15.3%, to $384 million, as compared to operating income of $333 million for the nine months ended June 27, 2014. The benefits of previous productivity and restructuring actions and a $38 million decline in separation costs was partially offset by an increase of $20 million in restructuring and repositioning activities.
Key items impacting operating income for the quarters and nine months ended June 26, 2015 and June 27, 2014, respectively, are as follows:
 
For the Quarters Ended
 
For the Nine Months Ended
($ in millions)
June 26,
2015
 
June 27,
2014
 
June 26,
2015
 
June 27,
2014
Separation costs
$
—

 
$
11

 
$
2

 
$
40

Restructuring and repositioning (gains) charges, net
(3
)
 
6

 
27

 
7


51

ROW Installation & Services
Financial information for ROW Installation & Services for the quarters and nine months ended June 26, 2015 and June 27, 2014 is as follows:
 
For the Quarters Ended
 
For the Nine Months Ended
($ in millions)
June 26,
2015
 
June 27,
2014
 
June 26,
2015
 
June 27,
2014
Net revenue
$
842

 
$
999

 
$
2,605

 
$
2,902

Net revenue decline
(15.7
)%
 
N/A

 
(10.2
)%
 
N/A

Organic revenue decline
(2.1
)%
 
N/A

 
(0.6
)%
 
N/A

Operating income
$
57

 
$
102

 
$
187

 
$
310

Operating margin
6.8
 %
 
10.2
%
 
7.2
 %
 
10.7
%
Net Revenue
The change in net revenue compared to the prior periods is attributable to the following:
Factors Contributing to Year-Over-Year Change
 
Third Quarter
Fiscal 2015
Compared to
Third Quarter
Fiscal 2014
 
Year to Date Fiscal 2015 Compared to Year to Date Fiscal 2014
Organic revenue decline
 
$
(21
)
 
$
(18
)
Acquisitions
 
11

 
44

Divestitures
 
(21
)
 
(34
)
Impact of foreign currency
 
(126
)
 
(289
)
Total change
 
$
(157
)
 
$
(297
)
Net revenue decreased $157 million, or 15.7%, to $842 million for the quarter ended June 26, 2015 as compared to $999 million for the quarter ended June 27, 2014. Changes in foreign currency exchange rates unfavorably impacted net revenue by $126 million, or 12.6%. On an organic basis, net revenue declined by $21 million, or 2.1%, primarily in the United Kingdom and the Pacific region as a result of pressure within the oil and gas and mining industries. These declines were partially offset by growth in our growth markets and to a lesser extent, Continental Europe. Net revenue was favorably impacted by $11 million, or 1.1%, due to acquisitions within growth markets, Continental Europe and the United Kingdom.
Net revenue decreased $297 million, or 10.2%, to $2,605 million for the nine months ended June 26, 2015 as compared to $2,902 million for the nine months ended June 27, 2014. Changes in foreign currency exchange rates unfavorably impacted net revenue by $289 million, or 10.0%. Net revenue was also unfavorably impacted by $34 million, or 1.2%, due to the divestiture of our Armourguard business in New Zealand and fire and security business in Fiji in the first quarter of fiscal 2014. On an organic basis, revenue decreased by $18 million, or 0.6%, as declines in the United Kingdom and our Pacific region, due to pressure within the oil and gas and mining industries, were partially offset by growth in growth markets and to a lesser extent, Continental Europe. Net revenue was favorably impacted by $44 million, or 1.5%, primarily due to acquisitions within growth markets, Continental Europe, and the United Kingdom.
Operating Income
Operating income for the quarter ended June 26, 2015 decreased $45 million, or 44.1%, to $57 million as compared to operating income of $102 million for the quarter ended June 27, 2014. Operating income was unfavorably impacted by a $29 million increase in restructuring and repositioning charges, and a slightly lower mix of high-margin service revenue offset by the benefits of cost-containment initiatives and previous productivity and restructuring actions.
Operating income for the nine months ended June 26, 2015 decreased $123 million, or 39.7%, to $187 million as compared to operating income of $310 million for the nine months ended June 27, 2014. Operating income was unfavorably impacted by a $51 million increase in restructuring and repositioning charges during the nine months ended June 26, 2015, a $17 million increase in loss on divestitures, and a slightly lower mix of high-margin service revenue. Operating income for the nine months ended June 26, 2015 was also unfavorably impacted by $20 million related to changes in foreign currency exchange rates and a non-recurring $21 million insurance recovery recorded in the prior comparable period. These unfavorable impacts were offset by the benefits of cost-containment initiatives and previous productivity and restructuring actions.

52

Key items impacting operating income for the quarters and nine months ended June 26, 2015 and June 27, 2014, respectively, are as follows:
 
For the Quarters Ended
 
For the Nine Months Ended
($ in millions)
June 26,
2015
 
June 27,
2014
 
June 26,
2015
 
June 27,
2014
Loss on sale of investment
$
—

 
$
—

 
$
—

 
$
7

Restructuring and repositioning charges, net
40

 
11

 
66

 
15

(Gain) loss on divestitures
(5
)
 
—

 
18

 
1

China insurance recovery
—

 
—

 
—

 
(21
)
Impact of foreign currency
5

 
2

 
20

 
9

Global Products
Financial information for Global Products for the quarters and nine months ended June 26, 2015 and June 27, 2014 is as follows:
 
For the Quarters Ended
 
For the Nine Months Ended
($ in millions)
June 26,
2015
 
June 27,
2014
 
June 26,
2015
 
June 27,
2014
Net revenue
$
675

 
$
693

 
$
1,925

 
$
1,863

Net revenue (decline) growth
(2.6
)%
 
N/A

 
3.3
%
 
N/A

Organic revenue (decline) growth
(3.2
)%
 
N/A

 
4.3
%
 
N/A

Operating income
$
108

 
$
136

 
$
316

 
$
329

Operating margin
16.0
 %
 
19.6
%
 
16.4
%
 
17.7
%
Net Revenue
The change in net revenue compared to the prior periods is attributable to the following:
Factors Contributing to Year-Over-Year Change
 
Third Quarter
Fiscal 2015
Compared to
Third Quarter
Fiscal 2014
 
Year to Date Fiscal 2015 Compared to Year to Date Fiscal 2014
Organic revenue (decline) growth
 
$
(22
)
 
$
81

Acquisitions
 
49

 
80

Impact of foreign currency
 
(45
)
 
(99
)
Total change
 
$
(18
)
 
$
62

Net revenue decreased $18 million, or 2.6%, to $675 million for the quarter ended June 26, 2015 as compared to $693 million for the quarter ended June 27, 2014. On an organic basis, net revenue declined by $22 million, or 3.2%, primarily driven by our fire products and life safety businesses, partially offset by growth in our security products business. Net revenue was favorably impacted by $49 million, or 7.1%, from acquisitions during the quarter ended June 26, 2015. Net revenue was unfavorably impacted by changes in foreign currency exchange rates of $45 million, or 6.5% as well as increased Scott Air-Pak shipments during the comparable quarter in the prior year.
Net revenue increased $62 million, or 3.3%, to $1,925 million for the nine months ended June 26, 2015 as compared to $1,863 million for the nine months ended June 27, 2014. On an organic basis, net revenue growth of $81 million, or 4.3%, was driven by growth in our security products and life safety businesses, while our fire products business was roughly flat. Acquisitions favorably impacted net revenue by $80 million, or 4.3%. Changes in foreign currency exchange rates unfavorably impacted net revenue by $99 million, or 5.3%.
Operating Income
Operating income for the quarter ended June 26, 2015 decreased by $28 million, or 20.6% to $108 million, as compared to operating income of $136 million for the quarter ended June 27, 2014. Operating income was unfavorably impacted by the decline in net revenue and additional investments in research and development for the quarter ended June 26, 2015. These impacts were partially offset by the benefit of cost-containment initiatives and prior productivity and restructuring actions.

53

Operating income for the nine months ended June 26, 2015 decreased by $13 million, or 4.0% to $316 million, as compared to operating income of $329 million for the nine months ended June 27, 2014. The decrease was primarily due to an unfavorable impact of foreign currency exchange rates of $11 million, a $7 million increase in restructuring and repositioning charges, and additional investments in research and development. These were partially offset by increases due to net revenue growth for the nine months ended June 26, 2015, as well as the benefit of cost-containment initiatives and prior productivity and restructuring actions.
Key items impacting operating income for the quarters and nine months ended June 26, 2015 and June 27, 2014, respectively, are as follows:
 
For the Quarter Ended
 
For the Nine Months Ended
($ in millions)
June 26,
2015
 
June 27,
2014
 
June 26,
2015
 
June 27,
2014
Restructuring and repositioning charges, net
$
5

 
$
3

 
$
16

 
$
9

Impact of foreign currency
4

 
(1
)
 
11

 
(1
)
Corporate and Other
Corporate expense was $72 million for the quarter ended June 26, 2015 compared to $58 million for the quarter ended June 27, 2014. The increase in expense was primarily due to a $13 million increase in restructuring and repositioning charges compared to the quarter ended June 27, 2014 as well as a $7 million unfavorable change in asbestos related charges as a result of gains recorded in the prior comparable quarter for insurance recoveries.
Corporate expense was $214 million for the nine months ended June 26, 2015 compared to $73 million for the nine months ended June 27, 2014. The increase in expense was primarily due to the reversal of a compensation reserve of $92 million for the settlement of legacy litigation with former management, and a gain of $16 million related to a legal settlement with CIT Group, for the nine months ended June 27, 2014. In addition, restructuring and repositioning charges increased by $36 million compared to the nine months ended June 27, 2014 as well as a $12 million unfavorable change in asbestos related charges as a result of gains recorded in the prior comparable period for insurance recoveries.
Key items included in corporate expense for the quarters and nine months ended June 26, 2015 and June 27, 2014, respectively, are as follows:
 
For the Quarters Ended
 
For the Nine Months Ended
($ in millions)
June 26,
2015
 
June 27,
2014
 
June 26,
2015
 
June 27,
2014
Legacy legal gains
$
(2
)
 
$
(4
)
 
$
(9
)
 
$
(96
)
CIT settlement gain
—

 
—

 
—

 
(16
)
Restructuring and repositioning charges, net
23

 
10

 
60

 
24

Asbestos related charges (gains)
1

 
(6
)
 
7

 
(5
)
Critical Accounting Policies and Estimates
The preparation of the unaudited Consolidated Financial Statements in conformity with US GAAP requires management to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses. We believe that our accounting policies for depreciation and amortization methods of security monitoring-related assets, revenue recognition, loss contingencies, income taxes, goodwill and indefinite-lived intangible assets, long-lived assets and pension and postretirement benefits are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties. During fiscal 2015, there have been no significant changes to these policies or in the underlying accounting assumptions and estimates used in the above critical accounting policies from those disclosed in the Consolidated Financial Statements and accompanying notes contained in the Company's Annual Report on Form 10-K filed with the SEC on November 14, 2014 for the fiscal year ended September 26, 2014.

54

Liquidity and Capital Resources
A fundamental objective of the Company is to have sufficient liquidity, balance sheet strength, and financial flexibility to fund the operating and capital requirements of its core businesses around the world.
The primary source of funds to finance our operations and capital expenditures is cash generated by operations. In addition, we maintain a commercial paper program, have access to a $1 billion committed revolving credit facility, and have access to equity and debt capital from public and private sources. We continue to balance our operating, investing, and financing uses of cash through investments and acquisitions in our core businesses, dividends, and share repurchases. In addition, we believe our available cash, amounts available under our credit facility, commercial paper program and cash provided by operating activities will be adequate to cover our operational, capital and other business needs in the foreseeable future. To the extent it is necessary for us to finance our cash needs through the issuance of commercial paper, by accessing our committed revolving credit facility, or through other public or private sources, our cost of funding may increase depending on market conditions at the time of such borrowing.
As of June 26, 2015 and September 26, 2014, our cash and cash and cash equivalents, total debt, available amounts under committed credit facilities, and Tyco shareholders’ equity were as follows:
 
As of
 
Credit Availability as of
($ in millions)
June 26,
2015
 
September 26,
2014
 
June 26,
2015
Cash and cash equivalents
$
531

 
$
892

 
$
—

Total debt (excluding revolving credit facility)
2,021

 
1,463

 
—

Revolving credit facility
—

 
—

 
1,000

Total Tyco shareholders' equity
4,304

 
4,647

 
—

Total debt as a % of total capital (1)
32.0
%
 
23.9
%
 
NA

(1) Total capital represents the aggregate amount of total debt and total Tyco Shareholders' equity which was $6,325 million and $6,110 million as of June 26, 2015 and September 26, 2014, respectively.
Significant uses of capital that are expected in the near- to mid-term include expenditures for (i) capital expenditures and dealer investments in annual amounts expected to approximate 3% to 3.5% of total revenues, (ii) the funding of a Yarway asbestos trust in the amount of approximately $325 million during the fourth quarter of fiscal 2015 (see Note 11 to our unaudited Consolidated Financial Statements), (iii) the funding of potential tax liabilities or settlements (see Notes 6 and 11 to our unaudited Consolidated Financial Statements), including with respect to the divestiture of our ADT South Korea business, with respect to which the amounts and timing are uncertain, (iv) repayment of $258 million in principal amount of 3.375% public notes due in October 2015, and (v) dividend payments in an annual amount of approximately $345 million as of March 27, 2015, $86 million of which had been paid as of June 26, 2015. The Company intends to fund these capital uses through a combination of available cash, cash generated from operations, borrowing in the commercial paper market or under its revolving credit facility, and borrowing in public or private markets for debt securities. In addition, the Company intends, in its discretion, to pursue strategically important acquisitions, may repurchase its shares from time to time and may engage in other capital market activities (such as refinancing of outstanding debt), in each case depending on a number of factors, including the Company’s strategic priorities, its financial condition and results of operations, the capital requirements of the Company’s businesses, industry and capital markets factors and other relevant factors.
Sources and uses of cash
Our cash flows from operating, investing and financing from continuing operations for the nine months ended June 26, 2015 and June 27, 2014 are summarized below:
 
For the Nine Months Ended
($ in millions)
June 26,
2015
 
June 27,
2014
Net cash provided by operating activities
$
511

 
$
518

Net cash used in investing activities
(752
)
 
(83
)
Net cash (used in) provided by financing activities
(102
)
 
922


55

On January 9, 2015, the Company completed a series of restructuring transactions related to the establishment and funding of a structure dedicated to resolving certain historic Grinnell asbestos liabilities. Pursuant to this transaction, a subsidiary of the Company acquired certain assets of Grinnell and transferred cash and other assets totaling approximately $278 million to the structure.  The cash and assets transferred to the structure have been designated as restricted by the Company. In addition, on the effective date of Yarway’s Chapter 11 plan of reorganization, which is anticipated to occur in the fourth fiscal quarter of 2015, the Company expects to contribute approximately $325 million to an asbestos settlement trust that conforms to the provisions of Section 524(g) of the U.S. Bankruptcy Code.  See Note 11 to our unaudited Consolidated Financial Statements.
Cash flow from operating activities
Cash flow from operating activities can fluctuate significantly from period to period as working capital needs and the timing of payments for items such as restructuring activities, asbestos related liabilities, pension funding, income taxes and other items impact reported cash flow.
The net change in working capital decreased operating cash flow by $372 million in the nine months ended June 26, 2015. The significant changes in working capital included a $104 million increase in accounts receivable, a $78 million decrease in accounts payable, a $72 million increase in inventories, a $50 million decrease in accrued and other liabilities, and a $25 million increase in prepaid expenses and other current assets.
The net change in working capital decreased operating cash flow by $503 million in the nine months ended June 27, 2014. The significant changes in working capital included a $361 million decrease in accrued and other liabilities, a $50 million increase in contracts in progress, $41 million increase in accounts receivable and a $39 million increase in prepaid expenses.
During the nine months ended June 26, 2015 and June 27, 2014, we paid approximately $78 million and $57 million, respectively, in cash related to restructuring activities.
In connection with the 2012 Separation, we paid $2 million and $48 million in separation costs during the nine months ended June 26, 2015 and June 27, 2014, respectively.
During the nine months ended June 26, 2015 and June 27, 2014, we made net payments related to asbestos liabilities of $8 million and $3 million, respectively.
During the nine months ended June 26, 2015 and June 27, 2014, we made net payments related to environmental remediation activities for a facility located in Marinette, Wisconsin, of $7 million and $60 million, respectively.
During the nine months ended June 27, 2014, Tyco made a net cash payment of $155 million to Medtronic under the terms of the 2007 Tax Sharing Agreement. The cash exchanged was a reimbursement between the parties for various payments made to the IRS for federal income taxes related to the audit of fiscal years 2005 through 2007. During the nine months ended June 26, 2015, we did not pay or receive cash under the terms of the Tax Sharing Agreements.
During the nine months ended June 27, 2014, Tyco settled a tax dispute with CIT Group, a former subsidiary. Under the terms of the settlement agreement, Tyco received $60 million, of which $25 million and $19 million was subsequently paid during fiscal 2014 to Medtronic and TE Connectivity, respectively, under the terms of the 2007 Tax Sharing Agreement.
During the nine months ended June 26, 2015 and June 27, 2014, we made required contributions of $9 million and $17 million, respectively, to our U.S. pension plans and $13 million and $20 million, respectively, to our non-U.S. pension plans. We anticipate that we will contribute at least the minimum required to our pension plans in 2015 of $13 million for our U.S. plans and $23 million for our non-U.S. plans.
Income taxes paid, net of refunds, related to continuing operations were $84 million and $74 million during the nine months ended June 26, 2015 and June 27, 2014, respectively.
Net interest paid related to continuing operations was $52 million and $53 million for the nine months ended June 26, 2015 and June 27, 2014, respectively.

56

Cash flow from investing activities
Cash flows related to investing activities consist primarily of cash used for capital expenditures, acquisitions, proceeds derived from divestitures of businesses, assets and the purchase and sales and maturities of investments.
We made capital expenditures of $183 million and $210 million for the nine months ended June 26, 2015 and June 27, 2014, respectively. The level of capital expenditures in fiscal 2015 is expected to be in line with the spending levels in fiscal 2014.
During the nine months ended June 26, 2015, we paid cash for acquisitions included in continuing operations totaling $525 million, net of cash acquired of $26 million, which primarily related to acquisitions in our ROW Installation & Services and Global Products segments. During the nine months ended June 27, 2014, we paid cash for acquisitions included in continuing operations totaling $63 million, net of $1 million cash acquired, which related to acquisitions included in our NA Installation & Services and ROW Installation & Services segments.
We maintain captive insurance companies to manage certain of our insurable liabilities. The captive insurance companies held certain investment accounts for the purposes of providing collateral for our insurable liabilities. During fiscal 2014, the portfolio of investments was liquidated and we now provide letters of credit as collateral. During the nine months ended June 27, 2014, our captive insurance companies made net sales of approximately $283 million. See Note 10 to our unaudited Consolidated Financial Statements.
During the nine months ended June 27, 2014, we purchased investments of $332 million, which was primarily comprised of time deposits of $277 million. During the nine months ended June 26, 2015, our time deposits of $275 million matured, and we made purchases of $290 million of investments, primarily consisting of exchange traded equity and fixed income funds, which are classified as available-for-sale investments. These investments are classified as restricted, as the Company plans to use them to fund the Yarway Trust during the fourth quarter of fiscal 2015.
During the nine months ended June 26, 2015, our restricted cash increased by $27 million. This increase was primarily driven by an increase of $7 million related to the asbestos-related liabilities, $16 million of recoveries from Mr. Swartz and Mr. Kozlowski, and $4 million of restricted cash related to an acquisition.
During the nine months ended June 27, 2014, we generated $250 million in proceeds from the sale of our equity method investment in Atkore, as described in Note 3 to our unaudited Consolidated Financial Statements.
Cash flow from financing activities
Cash flows from financing activities relate primarily to proceeds received from incurring debt and issuing stock, and cash used to repay debt, repurchase stock and make dividend payments to shareholders.
Proceeds from issuance of long-term debt primarily related to proceeds of $567 million from the issuance in February 2015 of €500 million aggregate principal amount of public notes due 2025. See Note 9 to our unaudited Consolidated Financial Statements.
As of June 26, 2015 and September 26, 2014, TIFSA had no commercial paper outstanding. The maximum aggregate amount of unsecured commercial paper notes available to be issued, on a private placement basis, under the commercial paper program is $1 billion as of June 26, 2015.
As of June 26, 2015 and September 26, 2014, there were no amounts drawn under the Company's revolving credit facility.
Pursuant to our share repurchase program, we may repurchase Tyco shares from time to time in open market purchases at prevailing market prices, in negotiated transactions off the market, or pursuant to an approved trading plan in accordance with applicable regulations. During the nine months ended June 26, 2015, we repurchased approximately 10 million ordinary shares for approximately $417 million. During the nine months ended June 27, 2014, we repurchased approximately 20 million ordinary shares for approximately $806 million.
On March 4, 2015, the Board of Directors approved a quarterly dividend of $0.205 per share payable on May 20, 2015 to shareholders of record on April 24, 2015. On March 5, 2014, our shareholders approved a cash dividend of $0.72 per ordinary share payable to shareholders in four quarterly installments of $0.18 in May 2014, August 2014, November 2014 and February 2015. During the nine months ended June 26, 2015 and June 27, 2014, we paid cash dividends of approximately $237 million and $231 million, respectively.

57

Included in cash flows from financing activities for the nine months ended June 26, 2015 is payment of contingent consideration of $23 million related to the acquisition of a business during fiscal year 2014.
Management believes that cash generated by or available to us should be sufficient to fund our capital and operational business needs for the foreseeable future, including capital expenditures, quarterly dividend payments, share repurchases, asbestos-related and other expenses.
Commitments and Contingencies
For a detailed discussion of contingencies related to tax and litigation matters, see Notes 6 and 11 to our unaudited Consolidated Financial Statements.
Backlog
We had a backlog of unfilled orders of $4,709 million and $4,857 million as of June 26, 2015 and September 26, 2014, respectively.
The Company's backlog includes recurring revenue-in-force and long-term deferred revenue for upfront fees from its NA and ROW Installation & Services segments. Revenue-in-force represents 12 months' revenue associated with monitoring and maintenance services under contract in the security and fire business. Backlog by segment was as follows ($ in millions):
 
NA Installation
& Services
 
ROW
Installation
& Services
 
Global
Products
 
Total
As of September 26, 2014
 
 
 
 
 
 
 
Backlog
$
992

 
$
997

 
$
181

 
$
2,170

Recurring revenue in force
1,243

 
1,140

 
—

 
2,383

Deferred revenue
266

 
38

 
—

 
304

Total Backlog
$
2,501

 
$
2,175

 
$
181

 
$
4,857

As of June 26, 2015
 

 
 

 
 

 
 

Backlog
$
1,075

 
$
824

 
$
215

 
$
2,114

Recurring revenue in force
1,228

 
1,087

 
—

 
2,315

Deferred revenue
244

 
36

 
—

 
280

Total Backlog
$
2,547

 
$
1,947

 
$
215

 
$
4,709

Backlog decreased $148 million, or 3.0%, to $4,709 million as of June 26, 2015 compared to $4,857 million as of September 26, 2014. Changes in foreign currency had an unfavorable impact of $210 million, or 4.3%, primarily in our ROW Installation & Services segment. In addition, a divestiture of a business in our ROW Installation & Services segment had an unfavorable impact of $104 million, or 2.1%. These impacts were partially offset by acquisitions primarily in our Global Products segment, which contributed $16 million, or 0.3%, to backlog.
Guarantees
The Company and certain of its subsidiaries have guaranteed the performance of third-parties and provided financial guarantees for uncompleted work and financial commitments. The terms of these guarantees vary with end dates ranging from the current fiscal year through the completion of such transactions. The guarantees would typically be triggered in the event of nonperformance and we believe that performance under the guarantees, if required, would not have a material effect on our financial position, results of operations or cash flows.
There are certain guarantees or indemnifications extended among Tyco, Medtronic, TE Connectivity, ADT and Pentair in accordance with the terms of the 2007 and 2012 Separation and Distribution Agreements and the Tax Sharing Agreements. The guarantees primarily relate to certain contingent tax liabilities included in the Tax Sharing Agreements. At the time of the 2007 and 2012 Separations, we recorded liabilities necessary to recognize the fair value of such guarantees and indemnifications. See Note 6 to the unaudited Consolidated Financial Statements. In addition, prior to the 2007 and 2012 Separations we provided support in the form of financial and/or performance guarantees to various Medtronic, TE Connectivity, ADT and Tyco Flow Control operating entities. To the extent these guarantees were not assigned in connection with the 2007 and 2012 Separations, we remained as the guarantor, but were typically indemnified by the former subsidiary. See Note 18 to the unaudited Consolidated Financial Statements.

58

In disposing of assets or businesses, we often provide representations, warranties and/or indemnities to cover various risks including, for example, unknown damage to the assets, environmental risks involved in the sale of real estate, liability to investigate and remediate environmental contamination at waste disposal sites and manufacturing facilities, and unidentified tax and other liabilities related to periods prior to disposition. We have no reason to believe that these uncertainties would have a material adverse effect on our financial position, results of operations or cash flows. We have recorded liabilities for known indemnifications included as part of environmental liabilities. See Note 11 to the unaudited Consolidated Financial Statements.
In the normal course of business, we are liable for contract completion and product performance. We record estimated product warranty costs at the time of sale. In the opinion of management, such obligations will not significantly affect our financial position, results of operations or cash flows.
For a detailed discussion of guarantees and indemnifications, see Note 18 to the unaudited Consolidated Financial Statements.
Non-U.S. GAAP Measure
In an effort to provide investors with additional information regarding our results as determined by U.S. GAAP, we also disclose the non-U.S. GAAP measure of organic revenue growth (decline). We believe that this measure is useful to investors in evaluating our operating performance for the periods presented. When read in conjunction with our U.S. GAAP revenue, it enables investors to better evaluate our operations without giving effect to fluctuations in foreign exchange rates and acquisition and divestiture activity, either of which may be significant from period to period. In addition, organic revenue growth (decline) is a factor we use in internal evaluations of the overall performance of our business. This measure is not a financial measure under U.S. GAAP and should not be considered as a substitute for revenue as determined in accordance with U.S. GAAP, and it may not be comparable to similarly titled measures reported by other companies. Organic revenue growth (decline) presented herein is defined as revenue growth (decline) excluding the effects of foreign currency fluctuations, acquisitions and divestitures and other changes that may not reflect underlying results and trends. Our organic growth (decline) calculations incorporate an estimate of prior year reported net revenue associated with acquired entities that have been fully integrated within the first year, and exclude prior year net revenue associated with entities that do not meet the criteria for discontinued operations which have been divested within the past year ("adjusted number"). We calculate the rate of organic growth (decline) based on the adjusted number to better reflect the rate of growth (decline) of the combined business, in the case of acquisitions, or the remaining business, in the case of dispositions. We base the rate of organic growth (decline) for acquired businesses that are not fully integrated within the first year upon unadjusted historical net revenue. Foreign currency fluctuations are calculated by subtracting (i) the U.S. dollar equivalent of local currencies for the current period using monthly weighted average exchange rates for the prior period from (ii) the U.S. dollar equivalent of local currencies for the current period using monthly weighted average exchange rates for the current period. We may use organic revenue growth (decline) as a component of our compensation programs.
The table below details the components of organic revenue growth (decline) and reconciles the non-U.S. GAAP measure to U.S. GAAP net revenue growth (decline).
Quarter Ended June 26, 2015
 
Net Revenue for the Quarter Ended
June 27, 2014
 
Base Year
Adjustments
Divestitures / Other
 
Adjusted
Fiscal 2014
Base Revenue
 
Foreign
Currency
 
Acquisitions
 
Organic
Revenue(1)
 
Organic
Growth
Percentage
 
Net Revenue for the Quarter Ended
June 26, 2015
 
($ in millions)
NA Installation & Services
$
968

 
$
—

 
$
968

 
$
(12
)
 
$
3

 
$
13

 
1.3
 %
 
$
972

ROW Installation & Services
999

 
(21
)
 
978

 
(126
)
 
11

 
(21
)
 
(2.1
)%
 
842

Global Products
693

 
—

 
693

 
(45
)
 
49

 
(22
)
 
(3.2
)%
 
675

Total Net Revenue
$
2,660

 
$
(21
)
 
$
2,639

 
$
(183
)
 
$
63

 
$
(30
)
 
(1.1
)%
 
$
2,489

(1) 
Organic revenue growth percentage based on adjusted fiscal 2014 base revenue.


59

Nine Months Ended June 26, 2015
 
Net Revenue for the Nine Months Ended
June 27, 2014
 
Base Year
Adjustments
Divestitures / Other
 
Adjusted
Fiscal 2014
Base Revenue
 
Foreign
Currency
 
Acquisitions
 
Organic
Revenue(1)
 
Organic
Growth
Percentage
 
Net Revenue for the Nine Months Ended
June 26, 2015
 
($ in millions)
NA Installation & Services
$
2,864

 
$
—

 
$
2,864

 
$
(33
)
 
$
9

 
$
27

 
0.9
 %
 
$
2,867

ROW Installation & Services
2,902

 
(34
)
 
2,868

 
(289
)
 
44

 
(18
)
 
(0.6
)%
 
2,605

Global Products
1,863

 
—

 
1,863

 
(99
)
 
80

 
81

 
4.3
 %
 
1,925

Total Net Revenue
$
7,629

 
$
(34
)
 
$
7,595

 
$
(421
)
 
$
133

 
$
90

 
1.2
 %
 
$
7,397


(1) 
Organic revenue growth percentage based on adjusted fiscal 2014 base revenue.

Forward-Looking Information
Certain statements in this report are "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. All forward-looking statements involve risks and uncertainties. In many cases forward-looking statements are identified by words, and variations of words, such as “anticipate,” “estimate,” “believe,” “commit,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “positioned,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and other similar words. However, the absence of these words does not mean that the statements are not forward-looking. Any forward-looking statement contained herein, in press releases, written statements or other documents filed with the SEC, or in Tyco's communications and discussions with investors and analysts in the normal course of business through meetings, webcasts, phone calls and conference calls, regarding expectations with respect to future events, including sales, earnings, cash flows, operating and tax efficiencies, product line and technology expansion, backlog, the consummation and benefits of acquisitions and divestitures, as well as financings and repurchases of debt or equity securities, are subject to known and unknown risks, uncertainties and contingencies. Many of these risks, uncertainties and contingencies are beyond our control, and may cause actual results, performance or achievements to differ materially from anticipated results, performances or achievements. Factors that might affect such forward-looking statements include, among other things:
•
overall economic and business conditions, and overall demand for Tyco's goods and services;
•
economic and competitive conditions in the industries, end markets and regions served by our businesses;
•
changes in legal and tax requirements (including tax rate changes, new tax laws or treaties and revised tax law interpretations);
•
our, and our employees' and agents' ability to comply with complex and continually changing laws and regulations that govern our international operations, including the U.S. Foreign Corrupt Practices Act, similar anti-bribery laws in other jurisdictions, a variety of export control, customs, currency exchange control and transfer pricing regulations, and our corporate policies governing these matters;
•
the outcome of litigation, arbitrations and governmental proceedings;
•
effect of income tax audits, litigation, settlements and appeals;
•
our ability to repay or refinance our outstanding indebtedness as it matures;
•
our ability to operate within the limitations imposed by financing arrangements and to maintain our credit ratings;
•
interest rate fluctuations and other changes in borrowing costs, or other consequences of volatility in the capital or credit markets;
•
other capital market conditions, including availability of funding sources;
•
currency exchange rate fluctuations;
•
availability of and fluctuations in the prices of key raw materials;
•
changes affecting customers or suppliers;
•
economic and political conditions in international markets, including governmental changes and restrictions on the ability to transfer capital across borders;
•
our ability to achieve anticipated cost savings;
•
our ability to predict end-user demand for new or enhanced product or service offerings;
•
our ability to execute our portfolio refinement and acquisition strategies, including successfully integrating acquired operations;
•
potential impairment of our goodwill, intangibles and/or our long-lived assets;
•
our ability to realize the intended benefits of the 2012 Separation, including the integration of our commercial security and fire protection businesses;
•
other risks associated with the 2012 Separation, for example the risk that we may be liable for certain contingent liabilities of the spun-off entities if they were to become insolvent;

60

•
risks associated with our jurisdiction of incorporation, including the possibility of reduced flexibility with respect to certain aspects of capital management and corporate governance, increased or different regulatory burdens, and the possibility that we may not realize anticipated tax benefits;
•
the possible effects on Tyco of future legislation in the United States that may limit or eliminate potential U.S. tax benefits resulting from Tyco International's incorporation outside of the U.S. or deny U.S. government contracts to Tyco based upon its jurisdiction of incorporation;
•
natural events such as severe weather, fires, floods and earthquakes; and
•
acts of terrorism, cyber-attacks or our inability to maintain adequate security related information networks and data.
Item 3.    Quantitative and Qualitative Disclosures About Market Risk
The Company's exposure to market risk from changes in interest rates, foreign currency exchange rates and commodity prices has not changed materially from our exposure discussed in the 2014 Form 10-K. In order to manage the volatility relating to our more significant market risks, we may enter into forward foreign currency exchange contracts, interest rate swaps and commodity swaps. As of and during the nine months ended June 26, 2015, the Company did not hold or enter into any commodity derivative instruments or interest rate swaps.
We utilize established risk management policies and procedures in executing derivative financial instrument transactions. We do not execute transactions or hold derivative financial instruments for trading or speculative purposes. Derivative financial instruments related to non-functional currency cash flows are used with the goal of mitigating a significant portion of these exposures when it is cost effective to do so. Counterparties to derivative financial instruments are limited to financial institutions with strong investment grade long-term credit ratings.
Item 4.    Controls and Procedures
The Company, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures (as such term is defined under Rule 13a-15 of the Securities and Exchange Act (the Exchange Act)) as of the end of the period covered by this report. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of June 26, 2015, the Company's disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
There has been no change in our internal control over financial reporting during the quarter ended June 26, 2015 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.


61

PART II. OTHER INFORMATION
Item 1.    Legal Proceedings
Legacy Matters Related to Former Management
In recent years, the Company has settled several lawsuits involving disputes with former management. With respect to Dennis Kozlowski, the Company's former chief executive officer, in the first quarter of fiscal 2014, the parties signed an agreement resolving all outstanding disputes, with Mr. Kozlowski agreeing to release the Company from any claims to monetary amounts related to compensation, retention or other arrangements. As a result, in the first quarter of fiscal 2014, the Company reversed a non-cash net liability of approximately $92 million which was recorded in Selling, general and administrative expenses in the Consolidated Statement of Operations for the amounts allegedly due to him. Pursuant to the settlement agreement, Tyco will be entitled to a portion of the proceeds, if any, from the future sale of certain assets owned by Mr. Kozlowski, the timing and amount of which is uncertain. During the quarter ended June 26, 2015, the Company received approximately $4 million in cash from the sale of property owned by Mr. Kozlowski, $2 million of which will be shared pursuant to the terms of a legacy class action lawsuit, resulting in a net recovery of $2 million for the Company, which was recorded in Selling, general and administrative expenses in the Consolidated Statement of Operations. The cash received has been classified as restricted.
With respect to Mark Swartz, the Company's former chief financial officer, in November 2014 the parties reached a definitive agreement to resolve all outstanding disputes, with Mr. Swartz agreeing to release the Company from any claims to monetary amounts related to compensation, retention or other arrangements alleged to have existed between him and the Company. In the first quarter of fiscal 2015, the Company also received approximately $12 million in cash from Mr. Swartz, $5 million of which will be shared pursuant to the terms of a legacy class action lawsuit, resulting in a net recovery of $7 million for the Company, which was recorded in Selling, general and administrative expenses in the Consolidated Statement of Operations. The cash received has been classified as restricted.
Environmental Matters
Tyco is involved in various stages of investigation and cleanup related to 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 June 26, 2015, Tyco concluded that it was probable that it would incur remedial costs in the range of approximately $29 million to $72 million. As of June 26, 2015, Tyco concluded that the best estimate within this range is approximately $33 million, of which $15 million is included in Accrued and other current liabilities and $18 million is included in Other liabilities in the Company's Consolidated Balance Sheet.
The majority of the liabilities described above relate to ongoing remediation efforts at a facility in the Company's Global Products segment located in Marinette, Wisconsin, which the Company acquired in 1990 in connection with its acquisition of, among other things, the Ansul product line. Prior to Tyco's acquisition, Ansul manufactured arsenic-based agricultural herbicides at the Marinette facility, which resulted in significant arsenic contamination of soil and groundwater on the Marinette site and in parts of the adjoining Menominee River. Ansul has been engaged in ongoing remediation efforts at the Marinette site since 1990, and in February 2009 entered into an Administrative Consent Order (the "Consent Order") with the U.S. Environmental Protection Agency to address the presence of arsenic at the Marinette site. Under this agreement, Ansul's principal obligations are to contain the arsenic contamination on the site, pump and treat on-site groundwater, dredge, treat and properly dispose of contaminated sediments in the adjoining river areas, and monitor contamination levels on an ongoing basis. Activities completed under the Consent Order since 2009 include the installation of a subsurface barrier wall around the facility to contain contaminated groundwater, the installation of a groundwater extraction and treatment system and the dredging and offsite disposal of treated river sediment. As of June 26, 2015, the Company concluded that its remaining remediation and monitoring costs related to the Marinette facility were in the range of approximately $20 million to $47 million. The Company's best estimate within that range is approximately $23 million, of which $11 million is included in Accrued and other current liabilities and $12 million is included in Other liabilities in the Company's Consolidated Balance Sheet. Although the Company has recorded its best estimate of the costs that it will incur to remediate and monitor the arsenic contamination at the Marinette facility, it is possible that technological, regulatory or enforcement developments, the results of environmental studies or other factors could change the Company's expectations with respect to future charges and cash outlays, and such changes could be material to the Company's future results of operations, financial condition or cash flows.

62

Asbestos Matters
The Company and certain of its subsidiaries, including Yarway Corporation (“Yarway”) and Grinnell LLC (“Grinnell”), along with numerous other third parties, are named as defendants in personal injury lawsuits based on alleged exposure to asbestos containing materials. Over 90% of cases pending against affiliates of the Company have been filed against Yarway or Grinnell, and have typically involved product liability claims based primarily on allegations of manufacture, sale or distribution of industrial products that either contained asbestos or were used with asbestos containing components. Claims filed against Yarway derive from Yarway’s purported use of asbestos-containing gaskets and packing in the sale or distribution of steam valves and traps and from its alleged manufacture of asbestos-containing expansion joint packing. Yarway’s alleged manufacture, distribution and/or sale of asbestos-containing materials ceased by 1988, and Yarway ceased substantially all of its manufacturing, distribution and sales operations in 2003. Claims filed against Grinnell typically allege that it manufactured, sold or distributed valves, gaskets, piping and sprinkler systems containing asbestos.
As of June 26, 2015, the Company has determined that there were approximately 3,400 claims pending against it. This amount reflects the Company's current estimate of the number of viable claims made against it, excludes any claims against Yarway, and includes adjustments for claims that are not actively being prosecuted, identify incorrect defendants, are duplicative of other actions or for which the Company is indemnified by third parties. As a result of the Yarway bankruptcy filing described below, claims against Yarway have been stayed since April 2013.
As of June 26, 2015, the Company's estimated net liability, including Yarway, recorded within the Company's Consolidated Balance Sheet is $331 million. The net liability is comprised of a liability for pending and future claims and related defense costs of $838 million, of which $344 million is recorded in Accrued and other current liabilities, and $494 million is recorded in Other liabilities. The Company also maintains separate cash, investment and other assets of $507 million, of which $44 million is recorded in Prepaid expenses and other current assets, and $463 million is recorded in Other assets. Assets include $16 million of cash and $275 million of investments, which have all been designated as restricted. The Company believes that the asbestos related liabilities and insurance related assets as of June 26, 2015 are appropriate. As of September 26, 2014, the Company's estimated net liability, including Yarway, of $608 million was recorded within the Company's Consolidated Balance Sheet as a liability for pending and future claims and related defense costs of $853 million, and separately as an asset for insurance recoveries of $245 million.
Yarway
As previously disclosed, on April 22, 2013 Yarway filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code (“Chapter 11”) in the United States Bankruptcy Court for the District of Delaware (“Bankruptcy Court”). As a result of this filing, the continuation or commencement of asbestos-related litigation against Yarway has been enjoined by the automatic stay imposed by the U.S. Bankruptcy Code. Yarway's goal has been to negotiate, obtain approval of, and consummate a plan of reorganization that establishes a trust to fairly and equitably value and pay current and future Yarway asbestos claims, and that, in exchange for funding of the trust by the Company and/or its subsidiaries, provides permanent injunctive relief protecting the Company, each of its current and former affiliates and various other parties (the “Company Protected Parties”) from any further asbestos claims based on products manufactured, sold, and/or distributed by Yarway. On October 9, 2014, the Company reached an agreement in principle with Yarway, the Official Committee of Asbestos Claimants (“ACC”) appointed in the Yarway Chapter 11 case as the representative of current Yarway asbestos claimants, and the Future Claimants Representative (“FCR”) appointed in the Yarway Chapter 11 case as the representative of future Yarway asbestos claimants, to fund a section 524(g) trust for the resolution and payment of current and future Yarway asbestos claims. The agreement in principle will be implemented through a Chapter 11 plan of reorganization for Yarway, and is intended to resolve the potential liability of the Company Protected Parties for pending and future derivative personal injury claims related to exposure to asbestos-containing products that were allegedly manufactured, distributed, and/or sold by Yarway (“Yarway Asbestos Claims”). Under the Chapter 11 plan, an asbestos settlement trust (the “Yarway Trust”) that conforms to the provisions of Section 524(g) of the U.S. Bankruptcy Code will be established and, on the effective date of the Chapter 11 plan, the Company and Yarway will contribute to the Yarway Trust a total of approximately $325 million in cash (“Settlement Consideration”), which includes approximately $100 million relating to the settlement of intercompany amounts allegedly due to Yarway. In exchange for the Settlement Consideration, each of the Company Protected Parties will receive the benefit of a release from Yarway and an injunction under section 524(g) of the Bankruptcy Code permanently enjoining the assertion of Yarway Asbestos Claims against those Parties. On April 8, 2015, following the approval of the Plan by the required number of Yarway's current asbestos claimants, the Bankruptcy Court issued an order confirming the Plan, and on July 14, 2015, the United States District Court for the District of Delaware affirmed the Plan. Yarway expects to schedule an effective date for the Plan in August 2015.
On the effective date of the Plan, the Company and Yarway will pay the Settlement Consideration and Yarway Asbestos Claims against the Company Protected Parties will be permanently enjoined. Yarway is anticipated to become a wholly-owned subsidiary of the Yarway Trust and, accordingly, would no longer be owned by or be part of a consolidated group with the

63

Company. As a result of the agreement in principle to settle, the Company recorded a charge of $225 million in Selling, general and administrative expenses in the Consolidated Statement of Operations during the fourth fiscal quarter of 2014.
As a result of filing the voluntary bankruptcy petition during the third quarter of fiscal 2013, the Company recorded an expected loss upon deconsolidation of $10 million related to the Yarway Chapter 11 filing, which continues to represent the Company’s best estimate of its loss.
Other Claims
The Company continuously assesses the sufficiency of its estimated liability for pending and future asbestos claims and defense costs. On a quarterly basis, the Company evaluates actual experience regarding asbestos claims filed, settled and dismissed, amounts paid in settlements, and the recoverability of its insurance assets. If and when data from actual experience demonstrate an unfavorable discernible trend, the Company performs a valuation of its asbestos related liabilities and corresponding insurance assets including a comprehensive review of the underlying assumptions. In addition, the Company evaluates its ability to reasonably estimate claim activity beyond its current look-forward period in order to assess whether such period is appropriate. In addition to claims and litigation experience, the Company considers additional qualitative and quantitative factors such as changes in legislation, the legal environment, the Company’s strategy in managing claims and obtaining insurance, including its defense strategy, and health related trends in the overall population of individuals potentially exposed to asbestos. The Company evaluates all of these factors and determines whether a change in the estimate of its liability for pending and future claims and defense costs or insurance assets is warranted.
During the fourth quarter of fiscal 2014, the Company concluded that an unfavorable trend had developed in actual claim filing activity compared to projected claim filing activity established during the Company’s most recent valuation. Accordingly, the Company, with the assistance of independent actuarial service providers, performed a revised valuation of its asbestos-related liabilities and corresponding insurance assets. As part of the revised valuation, the Company assessed whether a change in its look-forward period was appropriate, taking into consideration its more extensive history and experience with asbestos-related claims and litigation (including its experience with Yarway), and determined that it was possible to make a reasonable estimate of the actuarially determined ultimate risk of loss for pending and unasserted potential future asbestos-related claims through 2056. In connection with the revised valuation, the Company considered a recent settlement with one of its insurers calling for the establishment of a qualified settlement fund, and the results of a separate independent actuarial consulting firm report conducted in the fourth quarter to assist the Company in obtaining insurance to fully fund all estimable asbestos-related claims (excluding Yarway claims) incurred through 2056.
The independent actuarial service firm calculated a total estimated liability for asbestos-related claims of the Company, which reflects the Company’s best estimate of its ultimate risk of loss to resolve all pending and future claims (excluding Yarway claims) through 2056, which is the Company’s reasonable best estimate of the actuarially determined time period through which asbestos-related claims will be filed against Company affiliates.
In conjunction with determining the total estimated liability, the Company retained an independent third party to assist it in valuing its insurance assets responsive to asbestos-related claims, excluding Yarway claims. These insurance assets represent amounts due to the Company for previously settled claims and the probable reimbursements relating to its total liability for pending and unasserted potential future asbestos claims and defense costs. In calculating this amount, the Company used the estimated asbestos liability for pending and projected future claims and defense costs described above, and it also considered the amount of insurance available, the solvency risk with respect to the Company's insurance carriers, resolution of insurance coverage issues, gaps in coverage, allocation methodologies, and the terms of existing settlement agreements with insurance carriers.
The amounts recorded by the Company for asbestos-related liabilities and insurance-related assets are based on the Company's strategies for resolving its asbestos claims, currently available information, and a number of estimates and assumptions. Key variables and assumptions include the number and type of new claims that are filed each year, the average cost of resolution of claims, the identity of defendants, the resolution of coverage issues with insurance carriers, amount of insurance, and the solvency risk with respect to the Company's insurance carriers. Many of these factors are closely linked, such that a change in one variable or assumption will impact one or more of the others, and no single variable or assumption predominately influences the determination of the Company's asbestos-related liabilities and insurance-related assets. Furthermore, predictions with respect to these variables are subject to greater uncertainty in the later portion of the projection period. Other factors that may affect the Company's liability and cash payments for asbestos-related matters include uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, reforms of state or federal tort legislation and the applicability of insurance policies among subsidiaries. As a result, actual liabilities or insurance recoveries could be significantly higher or lower than those recorded if assumptions used in the Company's calculations vary significantly from actual results.

64

In connection with the foregoing, during the third quarter of fiscal 2014, the Company resolved disputes with certain of its historical insurers and agreed that certain insurance proceeds would be used to establish and fund a qualified settlement fund (“QSF”), within the meaning of the Internal Revenue Code, which would be used for the resolution primarily of Grinnell asbestos liabilities of the Company. It is intended that the QSF will receive future insurance payments and proceeds from third party insurers and, in addition, will fund and manage liabilities for certain historical operations  of the Company. 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 a subsidiary of 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 during the quarter ended December 26, 2014 from historic third-party insurers in settlement of coverage disputes) to the structure. As part of the restructuring, subsidiaries in the structure assumed certain liabilities related to historic Grinnell, Scott and Figgie operations, including all historical Grinnell asbestos liabilities, and such subsidiaries purchased additional insurance by, through or from a wholly-owned subsidiary in the structure in order to supplement and enhance existing insurance assets. The structure and the QSF fully fund all historic Grinnell asbestos liabilities and provide for the efficient and streamlined management of claims related thereto.

The Company consolidates the qualified settlement fund and related entities that were established for the purpose of managing and resolving the liabilities described above. Although the entities in the dedicated structure serve the specific purpose of managing certain liabilities, each entity in the structure is a wholly-owned indirect subsidiary of the Company, and therefore is required to be consolidated under U.S. generally accepted accounting principles.
Tax Matters
Tyco and its subsidiaries' income tax returns are examined periodically by various tax authorities. In connection with these examinations, tax authorities, including the IRS, have raised issues and proposed tax adjustments, in particular with respect to years preceding the 2007 Separation. The issues and proposed adjustments related to such years are generally subject to the sharing provisions of a tax sharing agreement entered in 2007 with Medtronic and TE Connectivity (the "2007 Tax Sharing Agreement") under which Tyco, Medtronic and TE Connectivity share 27%, 42% and 31%, respectively, of shared income tax liabilities that arise from adjustments made by tax authorities to Tyco's, Medtronic's and TE Connectivity's U.S. and certain non-U.S. income tax returns. The costs and expenses associated with the management of these shared tax liabilities are generally shared equally among the parties. Tyco has previously disclosed that in connection with U.S. federal tax audits, the IRS has raised a number of issues and proposed tax adjustments for periods beginning with the 1997 tax year. Although Tyco has been able to resolve substantially all of the issues and adjustments proposed by the IRS for tax years through 2007, it has not been able to resolve matters related to the treatment of certain intercompany debt transactions during the period. As a result, on June 20, 2013, Tyco received Notices of Deficiency from the IRS asserting that several of Tyco's former U.S. subsidiaries owe additional taxes of $883.3 million plus penalties of $154 million based on audits of the 1997 through 2000 tax years of Tyco and its subsidiaries as they existed at that time. In addition, Tyco received Final Partnership Administrative Adjustments for certain U.S. partnerships owned by former U.S. subsidiaries with respect to which an additional tax deficiency of approximately $30 million has been asserted. These amounts exclude interest and do not reflect the impact on subsequent periods if the IRS position described below is ultimately proved correct.
The IRS asserted in the Notices of Deficiency that substantially all of Tyco's intercompany debt originated during the 1997 - 2000 period should not be treated as debt for U.S. federal income tax purposes, and has disallowed interest and related deductions recognized on U.S. income tax returns totaling approximately $2.9 billion. Tyco strongly disagrees with the IRS position and has filed petitions with the U.S. Tax Court contesting the IRS proposed adjustments. A trial date has been set for October 2016. Tyco believes that it has meritorious defenses for its tax filings, that the IRS positions with regard to these matters are inconsistent with the applicable tax laws and existing Treasury regulations, and that the previously reported taxes for the years in question are appropriate.
No payments with respect to these matters would be required until the dispute is definitively resolved, which, based on the experience of other companies, could take several years. Tyco believes that its income tax reserves and the liabilities recorded in the Consolidated Balance Sheet for the tax sharing agreements continue to be appropriate. However, the ultimate resolution of these matters, and the impact of that resolution, are uncertain and could have a material impact on Tyco's financial condition, results of operations and cash flows. In particular, if the IRS is successful in asserting its claim, it would have an adverse impact on interest deductions related to the same intercompany debt in subsequent time periods, totaling approximately $6.6 billion, which is expected to be disallowed by the IRS.
See Note 6 for additional information related to income tax matters.

65

Other Matters
As previously disclosed, SimplexGrinnell LP (“SG”), a subsidiary of the Company in the North America Installation & Services segment, has been named as a defendant in lawsuits in several jurisdictions seeking damages for SG’s alleged failure to pay prevailing wages and for other pay-related claims. Through the first quarter of fiscal 2015, the Company had recorded a total of approximately $17 million in charges related to these lawsuits which was recorded in the Cost of services within the Consolidated Statement of Operations. During the quarter ended March 27, 2015, the Company agreed in principle to settle all outstanding lawsuits for a total of approximately $14 million.
During the first quarter of fiscal 2015, the Company received and responded to inquiries from the U.S. Department of the Navy regarding the formulation of certain aqueous film forming foam ("AFFF") concentrates. The Company investigated such matters and ceased selling certain AFFF and other foam products pending the outcome of its investigation. During the course of the investigation, three AFFF products were removed from the Navy’s Qualified Products List ("QPL"); one AFFF product remains on the QPL. The Company has shared the results of its investigation with appropriate governmental authorities and is also communicating with the government regarding the re-qualification of these products. The government has confirmed that it considers the Company to be “presently responsible,” and that no suspension or debarment is warranted. At this time, we cannot predict the outcome of these inquiries and whether this will result in further action by the Navy or other governmental authorities, but it is possible that the Company could be required to pay material fines, consent to injunctions on future conduct, or suffer other criminal or civil penalties or adverse impacts, including being subject to lawsuits brought by private litigants.
In addition to the foregoing, the Company is subject to claims and suits, including from time to time, contractual disputes and product and general liability claims, incidental to present and former operations, acquisitions and dispositions. With respect to many of these claims, the Company either self-insures or maintains insurance through third-parties, with varying deductibles. While the ultimate outcome of these matters cannot be predicted with certainty, the Company believes that the resolution of any such proceedings, whether the underlying claims are covered by insurance or not, will not have a material adverse effect on the Company's financial condition, results of operations or cash flows beyond amounts recorded for such matters.
Item 1A.    Risk Factors
Tyco's significant business risks are described in Part I, Item 1A in our 2014 Form 10-K, to which reference is made herein. Management does not believe that there have been any significant changes in the Company's risk factors since the Company filed the 2014 Form 10-K.
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
During the quarter ended June 26, 2015, no ordinary shares were repurchased on the New York Stock Exchange. In addition, acquisitions of shares by the Company from certain employees in order to satisfy employee tax withholding requirements in connection with the vesting of restricted shares were not material during the quarter ended June 26, 2015.
Item 3.    Defaults Upon Senior Securities
None.
Item 4.    Mine Safety Disclosures
None.
Item 5.    Other Information
None.

66

Item 6.   Exhibits
Exhibit
Number
 
Exhibit
31.1

 
Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith).
31.2

 
Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith).
32.1

 
Certification by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith).
101

 
Financial statements from the quarterly report on Form 10-Q of Tyco International plc. for the quarter ended June 26, 2015 formatted in XBRL: (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Shareholders' Equity, and (vi) the Notes to Unaudited Consolidated Financial Statements.

67

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
TYCO INTERNATIONAL PLC
 
By:
/s/ ARUN NAYAR
 
 
Arun Nayar
 Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)

Date: July 31, 2015

68


Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, George R. Oliver, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Tyco International plc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 31, 2015
 
/s/ GEORGE R. OLIVER
 
George R. Oliver
Chief Executive Officer





Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Arun Nayar, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Tyco International plc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 31, 2015
 
/s/ ARUN NAYAR
 
Arun Nayar
Executive Vice President and Chief Financial Officer





Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
TYCO INTERNATIONAL PLC
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
        The undersigned officers of Tyco International plc (the "Company") hereby certify to their knowledge that the Company's quarterly report on Form 10-Q for the period ended June 26, 2015 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ GEORGE R. OLIVER
 
George R. Oliver
Chief Executive Officer
 
 
 
/s/ ARUN NAYAR
 
Arun Nayar
Executive Vice President and Chief Financial Officer
 


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