ADT 2011 Annual Report Download - page 111

applications for which the uses of our products are appropriate. We continually evaluate developing
technologies in areas that we believe will enhance our business for possible investment. Our research
and development expense was $147 million in 2011, $131 million in 2010 and $116 million in 2009.
Raw and Other Purchased Materials
We are a large buyer of metals and other commodities, including gasoline. Materials are purchased
from a large number of independent sources around the world. There have been no shortages in
materials that have had a material adverse effect on our businesses. We enter into long-term supply
contracts, using fixed or variable pricing to manage our exposure to potential supply disruptions.
Significant changes in certain raw material costs may have an adverse impact on costs and operating
margins.
Governmental Regulation and Supervision
Our operations are subject to numerous federal, state and local laws and regulations, both within
and outside the United States, in areas such as: consumer protection, government contracts,
international trade, environmental protection, labor and employment, tax, licensing and others. For
example, most U.S. states in which we operate have licensing laws directed specifically toward the
alarm and fire suppression industries. Our Tyco Security Solutions business currently relies extensively
upon the use of wireline and wireless telephone service to communicate signals, and wireline and
wireless telephone companies in the United States are regulated by the federal and state governments.
Another example is our Tyco Flow Control business, which is subject to strict regulations governing the
import and export of goods and technologies across international borders, particularly with respect to
‘‘dual use’’ products, which are products that may have both civil and military applications or may
otherwise be involved in weapons proliferation. In addition, government regulation of fire safety codes
can impact our Tyco Fire Protection business. These and other laws and regulations impact the manner
in which we conduct our business, and changes in legislation or government policies can affect our
worldwide operations, both positively and negatively. For a more detailed description of the various
laws and regulations that affect our business, see Item 1A. Risk Factors—Risks Related to Legal,
Regulatory and Compliance Matters and Item 3. Legal Proceedings.
Environmental Matters
We are subject to numerous foreign, federal, state and local environmental protection and health
and safety laws governing, among other things, the generation, storage, use and transportation of
hazardous materials; emissions or discharges of substances into the environment; and the health and
safety of our employees.
Certain environmental laws assess liability on current or previous owners or operators of real
property for the cost of removal or remediation of hazardous substances at their properties or at
properties at which they have disposed of hazardous substances. In addition to cleanup actions brought
by governmental authorities, private parties could bring personal injury or other claims due to the
presence of, or exposure to, hazardous substances or pursuant to indemnifications provided by us in
connection with asset disposals. We have received notification from the U.S. Environmental Protection
Agency and from state environmental agencies that conditions at a number of sites where we and
others disposed of hazardous substances require cleanup and other possible remedial action and may
require that we reimburse the government or otherwise pay for the cost of cleanup of those sites and/or
for natural resource damages. We have projects underway at a number of current and former
manufacturing facilities to investigate and remediate environmental contamination resulting from past
operations.
8 2011 Financials