ADT 2002 Annual Report Download - page 22

accounting had been employed. This pattern may have had the effect of reducing the clarity and
effectiveness of the financial statements in conveying to investors the most accurate picture of our
operations and may affect the comparability of our historical financial results to our current and future
results of operations.
Further instances of breakdowns in our internal controls and procedures could have an adverse effect on
us.
New management has determined that, in the past, Tyco in general suffered from: poor
documentation; inadequate policies and procedures to prevent the misconduct of senior corporate
executives; inadequate procedures for proper corporate authorizations; inadequate approval procedures
and documentation; a lack of oversight by senior management at the corporate level; a pattern of using
aggressive accounting that, even when in accordance with GAAP, was intended to increase reported
earnings above what they would have been if more conservative accounting had been employed;
pressure on, and inducements to, segment and unit managers to increase current earnings, including by
decisions as to what accounting treatment to employ; and a lack of a stated and demonstrable
commitment by former senior corporate management to set high standards of ethics, integrity,
accounting, and corporate governance. We cannot assure you that we will not discover that there have
been further instances of breakdowns in our internal controls and procedures.
The price of Tyco common shares has declined considerably in the last year and may fluctuate widely in
the future.
The market price of the Tyco common shares has declined considerably since January 2002, due in
part to disclosures regarding alleged breaches of fiduciary duties, fraud and other wrongful conduct on
the part of certain former officers and directors of Tyco. In addition, our publicly traded securities, and
the global stock markets generally, have experienced significant price and volume fluctuations over the
past year. We cannot assure you that the price of our publicly traded securities will not decline further
or will not continue to experience significant price and volume fluctuations. In addition, we believe that
factors such as quarterly fluctuations in financial results, earnings below analysts’ estimates and
financial performance and other activities of other publicly traded companies in our industries could
cause the price of our publicly traded securities to fluctuate substantially.
Risks Relating to Our Substantial Debt and Our Liquidity
We have substantial cash needs and will need to obtain additional funding to satisfy those needs.
As of March 31, 2003, we have approximately $4.4 billion of debt payable at maturity or upon the
option of the holders thereof through March 31, 2004. In addition, we have other substantial capital
commitments in fiscal 2003, including the following:
• approximately $650-$700 million of cash to acquire ADT accounts from dealers, of which
approximately $360 million has been spent through March 31, 2003;
• approximately $500 million of cash restructuring expenses relating to restructuring charges we
have previously recorded, of which approximately $290 million has been spent through
March 31, 2003;
• approximately $350 million of cash purchase accounting spending, including earn-out payments,
holdbacks of purchase price and the cost of exit plans, of which approximately $190 million has
been spent through March 31, 2003; and
• minimum operating lease payments of $808.4 million.
We estimate that our available cash and our cash flow from operations will be adequate to fund
our operations and service our debt through March 31, 2004. In making this estimate, we have not
assumed the need to make any material payments in connection with our pending litigation during that
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