ADT 2005 Annual Report Download - page 90

funding that we need on commercially reasonable terms or at all, which could have a material adverse
effect on our results of operations and cash flows.
Such an outcome 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, including
debt reduction or dividend payments;
• 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.
Additional negative publicity may adversely affect our business.
As a result of actions taken by our former senior corporate management, Tyco was the subject of
continuing negative publicity focusing on these actions. This negative publicity contributed to significant
declines in the prices of our publicly traded securities in 2002 and brought increased regulatory scrutiny
upon us. Additional negative publicity related to former senior corporate management’s actions could
have a material adverse effect on our results of operations and cash flows and the market price of our
publicly traded securities.
Our senior corporate management team is required to devote significant attention to matters arising from
actions of prior management.
We replaced our senior corporate executives with a new team during 2002 through 2004, and all of
the former members of our Board of Directors determined not to stand for reelection in March 2003.
A new Board of Directors was elected at our annual general meeting of shareholders in March 2003.
We cannot provide assurance that this major restructuring of our Board of Directors and senior
management team, and the accompanying distractions related to matters arising from the actions of
prior management will not adversely affect our results of operations.
Risks Relating to Our Businesses
Cyclical industry and economic conditions have affected and may continue to adversely affect our
financial condition and results of operations.
Our operating results in some of our segments are affected adversely by the general cyclical
pattern of the industries in which they operate. For example, demand for the products and services of
Fire and Security and Engineered Products and Services is significantly affected by levels of commercial
construction and consumer and business discretionary spending. Also, the electronic components
business within Electronics is heavily dependent on the end markets it serves and therefore can be
affected by the demand patterns of these markets, which could impact the margins in this business.
This cyclical impact can be amplified because some of our businesses purchase products from other of
our businesses. For example, Fire and Security purchases certain products sold by Engineered Products
and Services. Therefore, a drop in demand for our fire prevention products due to lower new
14 2005 Financials