ADT 2010 Annual Report Download - page 103

If we cannot obtain sufficient quantities of materials, components and equipment required for our
manufacturing activities at competitive prices and quality and on a timely basis, or if our
manufacturing capacity does not meet demand, our financial condition, results of operations or cash
flows may suffer.
We purchase materials, components and equipment from unrelated parties for use in our
manufacturing operations. If we cannot obtain sufficient quantities of these items at competitive prices
and quality and on a timely basis, we may not be able to produce sufficient quantities of product to
satisfy market demand, product shipments may be delayed or our material or manufacturing costs may
increase. In addition, because we cannot always immediately adapt our cost structures to changing
market conditions, our manufacturing capacity may at times exceed or fall short of our production
requirements. Any of these problems could result in the loss of customers, provide an opportunity for
competing products to gain market acceptance and otherwise adversely affect our financial condition,
results of operations or cash flows.
Failure to retain or attract qualified personnel could adversely affect our business.
The Company’s culture and guiding principles focus on continuously training, motivating and
developing employees, and in particular it strives to attract, motivate and retain qualified managers to
handle the day-to-day operations of a highly diversified organization. If we fail to retain and attract
qualified personnel, the Company’s operations could be adversely affected. In addition, excessive
turnover in personnel could cause manufacturing inefficiencies in certain of our businesses. The
demand for experienced management in certain geographic areas also makes it difficult to retain
qualified employees. High turnover could result in additional training and inefficiencies that could
adversely impact the Company’s operating results.
We have recognized substantial impairment charges in the past and may be required to recognize
additional impairment charges in the future.
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.
During the second fiscal quarter of 2009, we recognized aggregate goodwill and intangible asset
impairments of $2.7 billion, resulting primarily from a slowdown in the commercial markets including
the retailer end market in certain of our businesses; a decline in sales volume at our Electrical and
Metal Products segment; and downward revisions to forecasted results, restructuring actions and weaker
industry outlooks. As a result, the Company recognized an aggregate goodwill impairment of
$2.6 billion ($2.6 billion after-tax) at six of our reporting units and intangible asset impairments of
$64 million ($40 million after-tax). The Company believes that our goodwill balance as of
September 24, 2010 is recoverable. However, fair value determinations require considerable judgment
and are sensitive to change. Additional impairments to one or more of our reporting units could occur
in future periods whether or not connected to the annual impairment analysis. Future impairment
charges could materially affect our reported earnings in the periods of such charges and could adversely
affect our financial condition and results of operations.
2010 Financials 15