ADT 2005 Annual Report Download - page 86

Raw and Other Purchased Materials
We are a large buyer of steel and resin in the United States. We are also a large buyer of copper,
brass, gold, electronic components, chemicals and additives, thin and flexible copper clad materials,
zinc, paper, ink, foil, adhesives, cloth, wax, pulp and cotton. Certain of the components used in the Fire
Protection business, principally certain valves and fittings, are purchased for installation in fire
protection systems or for distribution. Materials are purchased from a large number of independent
sources around the world. There have been no shortages in materials which have had a material
adverse effect on our businesses. However, significant increases in certain raw material costs may have
an adverse impact on costs and operating margins. We enter into long-term supply contracts, using
fixed or variable pricing to manage our exposure to potential supply disruptions.
Patents and Trademarks
We own a portfolio of patents, which principally relate to electrical and electronic products,
healthcare products, fire protection devices, electronic security systems, flow control products, tubing
and building and cable products. We also own a portfolio of trademarks and are a licensee of various
patents and trademarks. Patents for individual products extend for varying periods according to the
date of patent filing or grant and the legal term of patents in the various countries where patent
protection is obtained. Trademark rights may potentially extend for longer periods of time and are
dependent upon national laws and use of the marks. All capitalized product names throughout this
document are trademarks owned by, or licensed to, the Company or its subsidiaries. Although these
have been of value and are expected to continue to be of value in the future, in the opinion of
management the loss of any single patent or trademark would not materially affect the conduct of the
business in any of our segments.
Employees
Tyco employed 247,900 people at September 30, 2005, of which 89,000 are employed in the United
States and 158,900 are outside the United States. We have collective bargaining agreements with labor
unions covering 36,900 employees at certain of our North American, European and Asia-Pacific
businesses. We believe that our relations with the labor unions are generally good.
In April 1994, following lengthy contract talks with the Road Sprinkler Fitters Local Union
No. 669, our Grinnell subsidiary declared that negotiations were at an impasse and implemented its last
best and final offer. Employees in those locations, representing 64% of Grinnell Fire Protection’s North
American union employees at the time (approximately 1,200 employees), went on strike. In
January 2001, the United States Court of Appeals for the Fourth Circuit determined that while
Grinnell had acted in good faith, the Company should not have declared an impasse. The court
ordered the reinstatement of the terms of the 1994 collective bargaining agreement, instructed the
Company to compensate any employees affected by the Company’s decision to declare an impasse and
ordered the parties to return to their negotiations. In January 2001 Tyco also acquired Simplex Time
Recorder Co. In January 2002, Grinnell Fire Protection and Simplex Time Recorder Co. began doing
business as SimplexGrinnell LP (an indirect wholly-owned subsidiary of Tyco). As instructed by the
court, SimplexGrinnell reinstated relevant terms of the 1994 collective bargaining agreement, made
whole any affected employees (approximately 2% of SimplexGrinnell’s employee population) and
resumed negotiations with Local Union No. 669.
In late December of 2004, SimplexGrinnell reached an agreement with Local 669 and the United
Association, resolving all matters that had been in dispute since 1994. As part of that agreement, Local
669 acknowledged that it no longer legally represents the employees of SimplexGrinnell.
10 2005 Financials