ADT 2002 Annual Report Download - page 19

Environmental Matters
We are subject to numerous foreign, federal, state and local environmental protection and health
and safety laws governing, among other things, the generation, storage, use and transportation of
hazardous materials; emissions or discharges into the ground, air or water; and the health and safety of
our employees. Compliance with environmental laws, however, has not had, and based on current
information and applicable laws, is not expected to have, a material adverse effect upon our capital
expenditures, earnings or competitive position. See Item 3. ‘‘Legal Proceedings’’ included in our
Form 10-K filed on December 30, 2002 for a description of a pending legal proceeding regarding
alleged Clean Water Act violations involving one of our businesses within the Electronics segment.
Certain environmental laws assess liability on current or previous owners or operators of real
property for the cost of removal or remediation of hazardous substances at their properties or at
properties at which they have disposed of hazardous substances. In addition to clean-up actions brought
by governmental authorities, private parties could bring personal injury or other claims due to the
presence of or exposure to hazardous substances. We have received notification from the United States
Environmental Protection Agency, and from state environmental agencies, that conditions at a number
of sites where we and others disposed of hazardous wastes require cleanup and other possible remedial
action and may be the basis for monetary sanctions. We have projects underway at several current and
former manufacturing facilities to investigate and remediate environmental contamination resulting
from past operations.
The ultimate cost of cleanup at disposal sites and manufacturing facilities is difficult to predict
given uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws
and regulations and alternative cleanup methods. Based upon our experience, current information and
applicable laws, we believe that it is probable that we will incur remedial costs in the range of
approximately $160 million to $460 million. As of September 30, 2002, we believe that the best estimate
within this range is approximately $248 million, of which $221 million is included in accrued expenses
and other current liabilities and $27 million is included in other long-term liabilities on the
Consolidated Balance Sheet. Included within the $248 million is $193 million related to the acquisition
of Mallinckrodt. In view of our financial position and reserves for environmental matters of
$248 million, we believe that any potential payment of such estimated amounts or additional monetary
sanctions will not have a material adverse effect on our consolidated financial position, results of
operations or liquidity.
Risk Factors
You should carefully consider the risks described below before investing in our publicly traded securities.
The risks described below are not the only ones facing us. Our business is also subject to the risks that
affect many other companies, such as competition, technological obsolescence, labor relations, general
economic conditions, geopolitical events and international operations. Additional risks not currently known
to us or that we currently believe are immaterial also may impair our business operations and our liquidity.
Risks Relating to Recent Developments at Tyco
Continuing negative publicity may adversely affect our business.
As a result of actions taken by our former senior corporate management, Tyco has been the
subject of continuing negative publicity focusing on former senior corporate management’s actions.
Some of these press reports have suggested that the accounting treatment of several of our prior
acquisitions was improper, that certain of our operating companies improperly conducted business or
recorded revenues and assets and that information was withheld from the SEC in connection with an
inquiry into our accounting practices. This negative publicity contributed to significant declines in the
prices of our publicly traded securities, and we have experienced reluctance on the part of certain
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