ADT 2008 Annual Report Download - page 117

effect on our financial condition, results of operations or cash flows. Further, in a declining price
environment, our operating margins may contract because we account for inventory using the first-in,
first-out method. This is most pronounced in our Electrical and Metals segment, where declining
copper and steel prices have begun to negatively affect our margins.
We monitor these exposures as an integral part of our overall risk management program. In some
cases, we purchase hedges or enter into contracts to insulate our results of operations from these
fluctuations. These hedges and contracts are subject to the risk that our counterparty may not perform.
As a result, changes in currency exchange rates, commodity prices and interest rates may have a
material adverse effect on our financial condition, results of operations or cash flows.
Divestitures of some of our businesses or product lines may materially adversely affect our financial
condition, results of operations or cash flows.
We continue to evaluate the performance of all of our businesses and may sell businesses or
product lines. For example, our Board of Directors approved several divestitures in 2008, including a
subsidiary that makes and sells fire protection products in Japan, a European manufacturer of building
products for the construction industry, a European manufacturer of public address and acoustic systems
and substantially all of our Infrastructure Services business. Any divestiture could result in significant
asset impairment charges, including those related to goodwill and other intangible assets, which could
have a material adverse effect on our financial condition and results of operations. Divestitures could
involve additional risks, including difficulties in the separation of operations, services, products and
personnel, the diversion of management’s attention from other business concerns, the disruption of our
business, the potential loss of key employees and the retention of uncertain environmental or other
contingent liabilities related to the divested business. We cannot assure you that we will be successful in
managing these or any other significant risks that we encounter in divesting a business or product line.
Our business strategy includes acquiring companies and making investments that complement our existing
businesses. These acquisitions and investments could be unsuccessful or consume significant resources,
which could adversely affect our operating results.
Acquisitions and investments may involve significant cash expenditures, debt incurrence, operating
losses and expenses that could have a material adverse effect on our financial condition and operating
results. Acquisitions involve numerous other risks, including:
• diversion of management time and attention from daily operations;
• difficulties integrating acquired businesses, technologies and personnel into our business;
• inability to obtain required regulatory approvals and/or required financing on favorable terms;
• potential loss of key employees, key contractual relationships, or key customers of acquired
companies or of us; and
• assumption of the liabilities and exposure to unforeseen liabilities of acquired companies.
It may be difficult for us to complete transactions quickly and to integrate acquired operations
efficiently into our current business operations. Any acquisitions or investments may ultimately harm
our business and financial condition, as such acquisitions may not be successful and may ultimately
result in impairment charges.
14 2008 Financials