ADT 2011 Annual Report Download - page 114

products may not achieve market acceptance and our brand images could suffer. In addition, our
competitors may introduce superior designs or business strategies, impairing our brands and the
desirability of our products and services, which may cause consumers to defer or forego purchases of
our products and services. In addition, the markets for our products and services may not develop or
grow as we anticipate. As a result, the failure of our technology, products or services to gain market
acceptance, the potential for product defects or the obsolescence of our products and services could
significantly reduce our revenues, increase our operating costs or otherwise adversely affect our
financial condition, results of operations or cash flows.
Our Tyco Security Solutions 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.
If customers in our Tyco Security Solutions business segment are dissatisfied with our products or
services and switch to competitive products or services, or disconnect for other reasons, our attrition
rates may increase. In periods of increasing attrition rates, Tyco Security Solutions’ recurring revenue
and results of operations may be materially adversely affected. The risk is more pronounced in times of
economic uncertainty, as customers may reduce amounts spent on the products and services we
provide. Tyco amortizes the costs of ADT’s acquired contracts and related customer relationships based
on the estimated life of the customer relationships. Internally generated residential and commercial
pools are similarly depreciated. If attrition rates were to rise significantly, we 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 generated 52% of our net revenue outside of the United States in 2011. 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 revenues, operating margins and other financial measures due to changes in
foreign currency exchange rates.
2011 Financials 11