ADT 2006 Annual Report Download - page 78

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
residential or office construction or other factors can cause a drop in demand for certain of our
products sold by Engineered Products and Services.
Our operations expose us to the risk of material environmental liabilities, litigation and violations.
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 of substances into the environment; and
• the health and safety of our employees.
There can be no assurances that we have been or will be at all times in compliance with environmental
and health and safety laws. If we violate these laws, we could be fined, criminally charged or otherwise
sanctioned by regulators.
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 cleanup 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 substances require cleanup and other possible remedial action and may require that we
reimburse the government or otherwise pay for the cost of cleanup of those sites and /or for natural
resource damages. We have projects underway at a number of current and former manufacturing
facilities to investigate and remediate environmental contamination resulting from past operations.
These projects relate to a variety of activities, including:
• radioactive materials decontamination and decommissioning;
• solvent, metal and other hazardous substance contamination cleanup; and
16 2006 Financials