ADT 2007 Annual Report Download - page 106

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:
• solvent, metal and other hazardous substance contamination cleanup; and
• oil spill equipment upgrades and replacement.
These projects involve both remediation expenses and capital improvements. In addition, we remain
responsible for certain environmental issues at manufacturing locations previously sold by us.
The ultimate cost of cleanup at disposal sites and manufacturing facilities is difficult to predict
given uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws
and regulations and alternative cleanup methods. Based upon our experience, current information and
applicable laws, we believe that it is probable that we would incur remedial costs of approximately
$40 million, of which $11 million is included in accrued expenses and other current liabilities and
$29 million is included in other liabilities on the Consolidated Balance Sheets. Environmental laws are
complex, change frequently and have tended to become more stringent over time. While we have
budgeted for future capital and operating expenditures to maintain compliance with such laws, we
cannot provide assurance that our costs of complying with current or future environmental protection
and health and safety laws, or our liabilities arising from past or future releases of, or exposures to,
hazardous substances will not exceed our estimates or adversely affect our financial condition, results of
operations or cash flows or that we will not be subject to additional environmental claims for personal
injury or cleanup in the future based on our past, present or future business activities.
We may be required to recognize additional impairment charges.
Pursuant to accounting principles generally accepted in the United States, we are required to
periodically assess our goodwill, intangibles and other long-lived assets to determine if they are
impaired. Disruptions to our business, end market conditions and protracted economic weakness,
unexpected significant declines in operating results of reporting units, divestitures and market
capitalization declines may result in additional charges for goodwill and other asset impairments. We
assessed the recoverability of goodwill upon the realignment of our business in connection with the
Separation, which resulted in a $46 million charge for goodwill. Future impairment charges could
substantially affect our reported earnings in the periods of such charges and could adversely affect our
financial condition and results of operations.
We are named as a defendant in a variety of litigation in the course of our business that could cause a
material adverse effect on our financial condition, results of operations or cash flows.
In the ordinary course of business, we are named as a defendant in a significant amount of
litigation, including claims for damages arising out of the use or installation of our products, litigation
alleging the infringement of intellectual property rights, litigation alleging anti-competitive behavior,
product liability litigation, employee matters and commercial disputes. In certain circumstances, patent
infringement and anti-trust laws permit successful plaintiffs to recover treble damages. The defense of
these lawsuits may divert our management’s attention, and we may incur significant expenses in
defending these lawsuits. In addition, we may be required to pay damage awards or settlements, or
become subject to injunctions or other equitable remedies, that could cause a material adverse effect
14 2007 Financials