ADT 2002 Annual Report Download - page 23

period and have assumed that we will be able to extend one of our receivables facilities that expires in
fiscal 2003. At March 31, 2003, there was approximately $350 million outstanding under this facility.
Any material adverse legal judgments, fines, penalties or settlements arising from our pending
investigations and litigations could require additional funding. We have also assumed a certain level of
operating performance in making these estimates. Our future operating performance will be affected by
general economic, financial, competitive, legislative, regulatory, geopolitical, business and other factors
beyond our control. If our future operating performance is less than anticipated, our need for
additional funding would increase.
If our estimates are incorrect and we need to obtain additional funding, we cannot assure you that
we will be able to obtain the additional funding that we need on commercially reasonably terms or at
all, which would have a material adverse effect on our results of operations and liquidity.
Our substantial indebtedness could adversely affect our financial health and prevent us from fulfilling our
obligations under our outstanding indebtedness.
Our substantial indebtedness could have important consequences to you. For example, it could:
• require us to dedicate a substantial portion of our cash flow from operations to payments on our
indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital
expenditures, research and development efforts and other general corporate purposes;
• increase our vulnerability to general adverse economic and industry conditions;
• limit our flexibility in planning for, or reacting to, changes in our businesses and the industries in
which we operate;
• restrict our ability to introduce new technologies or exploit business opportunities;
• make it more difficult for us to satisfy our payment obligations with respect to our outstanding
indebtedness; and
• increase the difficulty and/or cost to us of refinancing our indebtedness.
Restrictive covenants in our debt instruments may adversely affect us.
Our credit agreements contain a number of financial covenants, such as interest coverage and
leverage ratios, and minimum levels of net worth and restrictive covenants that limit the amount of
debt we can incur and restrict our ability to pay dividends or make other payments in connection with
our capital stock, to make acquisitions or investments, to enter into sale/leaseback transactions, to
pledge assets and to prepay debt that matures after December 31, 2004. We have several synthetic lease
facilities with similar covenants. Our outstanding indentures contain customary covenants including a
negative pledge, limit on subsidiary debt and limit on sale/leasebacks.
Our ability to meet these financial ratios and tests can be affected by events beyond our control,
and we cannot assure you that we will meet those tests. A breach of any of these covenants could result
in a default under our credit facilities or indentures. Upon the occurrence of an event of default under
any of our credit facilities or indentures, the lenders or trustees could elect to declare all amounts
outstanding thereunder to be immediately due and payable and terminate all commitments to extend
further credit. If the lenders or trustees accelerate the repayment of borrowings, we cannot assure you
that we will have sufficient assets to repay our credit facilities and our other indebtedness. Acceleration
of any obligation under any of our material debt instruments will permit the holders of our other
material debt to accelerate their obligations.
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