ADT 2010 Annual Report Download - page 104

Risks Related to Legal, Regulatory and Compliance Matters
We are subject to a variety of claims and litigation that could cause a material adverse effect on our
financial condition, results of operations or cash flows.
We are subject to a significant number of claims and are named as a defendant in numerous
lawsuits, 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), and litigation related to 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.
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. We
cannot predict the outcome of any specific legislative proposals. However, if proposals were enacted
that had the effect of disregarding our incorporation in 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 such legislation, if enacted, would not 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
segment relies heavily upon both wireline and wireless telephone service to communicate signals, and
these technologies 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 operations. In addition, failure to comply with any applicable laws or regulations could result in
substantial fines or revocation of our operating permits and licenses. If laws and regulations changed or
we failed to comply, our financial condition, results of operations or cash flows could be materially and
adversely affected.
16 2010 Financials