ADT 2009 Annual Report Download - page 104

Our ADT business may experience higher rates of customer attrition, which may reduce our future
revenue and cause us to change the estimated useful lives of assets related to our security monitoring
customers, increasing our depreciation and amortization expense.
Attrition rates for customers in our ADT Worldwide business increased over the prior year to an
average of 13.4% on a trailing 12-month basis for 2009, as compared to 12.9% for 2008, and 12.3% in
2007. Although rates have not increased significantly in the last fiscal year, if attrition rates continue to
trend upward, ADT’s recurring revenue and results of operations may be adversely affected. The risk is
more pronounced in times of economic uncertainty. Tyco amortizes the costs of ADT’s contracts and
related customer relationships purchased through the ADT dealer program based on the estimated life
of the customer relationships. Internally generated residential and commercial pools are similarly
depreciated. If attrition rates were to rise, Tyco may be required to accelerate the depreciation and
amortization of subscriber system assets and intangible assets, which could cause a material adverse
effect on our financial condition or results of operations.
We have significant operations outside of the United States, which are subject to political, economic and
other risks inherent in operating outside of the United States.
We have significant operations outside of the United States. We generated 52% of our net revenue
outside of the United States in 2009. We expect net revenue generated outside of the United States to
continue to represent a significant portion of total net revenue. Business operations outside of the
United States are subject to political, economic and other risks inherent in operating in certain
countries, such as:
• the difficulty of enforcing agreements, collecting receivables and protecting assets through non-
U.S. legal systems;
• trade protection measures and import or export licensing requirements;
• difficulty in staffing and managing widespread operations and the application of certain labor
regulations outside of the United States;
• compliance with a wide variety of non-U.S. laws and regulations;
• changes in the general political and economic conditions in the countries where we operate,
particularly in emerging markets;
• the threat of nationalization and expropriation;
• increased costs and risks of doing business in a wide variety of jurisdictions;
• changes in enacted tax laws;
• limitations on repatriation of earnings; and
• fluctuations in equity and revenues due to changes in foreign currency exchange rates.
Changes in the political or economic environments in the countries in which we operate could
have a material adverse effect on our financial condition, results of operations or cash flows.
Volatility in currency exchange rates, commodity prices and interest rates may adversely affect our
financial condition, result of operations or cash flows.
We are exposed to a variety of market risks, including the effects of changes in currency exchange
rates, commodity prices and interest rates. See Item 7A. Quantitative and Qualitative Disclosures
About Market Risk.
12 2009 Financials