ADT 2009 Annual Report Download - page 107

charges could materially affect our reported earnings in the periods of such charges and could adversely
affect our financial condition and results of operations.
Risks Related to Legal, Regulatory and Compliance Matters
We are named as a defendant in a variety of litigation that could cause a material adverse effect on our
financial condition, results of operations or cash flows.
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 or services, litigation alleging the infringement of
intellectual property rights, litigation alleging anti-competitive behavior, litigation related to
environmental matters, product liability litigation (including asbestos-related claims), litigation alleging
violations of federal and state securities laws, 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 have a material
adverse effect on our financial condition, results of operations or cash flows. Moreover, any insurance
or indemnification rights that we have may be insufficient or unavailable to protect us against potential
loss exposures.
Legislative action by the U.S. Congress could materially, adversely affect us despite our Change of
Domicile.
Legislative action could be taken by the U.S. Congress which, if ultimately enacted, could override
tax treaties upon which we rely, which would adversely affect our effective corporate tax rate despite
our Change of Domicile. We cannot predict the outcome of any specific legislative proposals. However,
if proposals were enacted that had the effect of disregarding our March 2009 Change of Domicile from
Bermuda to Switzerland or limiting our ability as a Swiss company to take advantage of the tax treaties
between Switzerland and the United States, we could be subjected to increased taxation. Also, various
U.S. federal and state legislative proposals have been introduced in recent years that deny, or would
deny, government contracts to U.S. companies that move their locations abroad. We cannot assure you
that moving our jurisdiction of incorporation to Switzerland has eliminated the risk that these contract
bans will apply to us.
In addition, there continues to be negative publicity regarding, and criticism of, companies that
conduct substantial business in the U.S. but are domiciled abroad. We cannot assure you that we will
not be subject to such criticism as a result of our domicile in Switzerland.
Changes in legislation or governmental regulations or policies can have a significant impact on our
financial condition, results of operations or cash flows.
We operate in regulated industries. Our U.S. operations are subject to regulation by a number of
federal, state and local governmental agencies with respect to safety of operations and equipment, labor
and employment matters and financial responsibility. Intrastate operations in the United States are
subject to regulation by state regulatory authorities, and our international operations are regulated by
the countries in which they operate and by extra-territorial laws. We and our employees are subject to
various U.S. federal, state and local laws and regulations, as well as non-U.S. laws and regulations,
including many related to consumer protection. Most states in which we operate have licensing laws
covering the monitored security services industry and the construction industry. Our ADT Worldwide
business relies heavily upon wireline telephone service to communicate signals, and wireline telephone
companies are regulated by both the federal and state governments. Changes in laws or regulations
could require us to change the way we operate, which could increase costs or otherwise disrupt
2009 Financials 15