TYC » Topics » Overview

This excerpt taken from the TYC 10-Q filed Aug 5, 2008.

Overview

        Internal investments to fund growth and productivity projects in our businesses are our first priority. However, we continue to expect to have excess cash and plan to return a portion of this cash to shareholders. During the quarter and nine months ended June 27, 2008, we repurchased 6.2 million and 18.3 million of our common shares for $279 million and $754 million, respectively, under the $1.0 billion share repurchase program approved by the Board of Directors in September 2007. Since June 27, 2008, we repurchased an additional 4.8 million common shares for $190 million completing this $1.0 billion share repurchase program which resulted in the purchase of approximately 5% of our outstanding shares during the program. On July 10, 2008, Tyco's Board of Directors approved a new $1.0 billion share repurchase program. During the quarter and nine months ended June 27, 2008, we paid dividends of $73 million and $221 million, respectively, to shareholders of record.

        We continue to assess the strategic fit of our various businesses and consider divestitures where businesses do not align with our long term strategy. As part of these portfolio refinement efforts, we sold our Empresa de Transmissao de Energia do Oeste Ltda. ("ETEO") business, our Ancon Building Products business, and our Nippon Dry-Chemical business in fiscal 2008. Subsequent to June 27, 2008

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Table of Contents


we substantially completed the sale of our Infrastructure Services Business. So far in 2008, we have received approximately $1 billion of cash proceeds from these divestitures. Additionally, on June 30, 2008 we acquired FirstService Security to strengthen ADT's system integration capabilities.

        We continue to focus on operational execution to drive earnings growth. To further improve operating efficiency, during the first quarter of 2007, we launched a restructuring program across all segments, including the corporate organization, which will streamline some of the businesses and reduce the operational footprint. We expect to incur aggregate charges related to the program of approximately $350 million to $400 million primarily through the end of calendar 2008. Since the inception of this program through the third quarter of 2008, the Company has incurred charges of $288 million related to this program. We believe this restructuring program will strengthen our competitive position over the long term.

        Additionally, we have made progress towards reducing our corporate expenses and we are well positioned to achieve our corporate expense run rate of $500 million for 2008.

        Also in connection with the settlement of the Indenture Trustee Litigation, on June 3, 2008 we, along with our finance subsidiary TIFSA, Tyco International Finance S.A. ("TIFSA"), a wholly-owned subsidiary of the Company and successor company to Tyco International Group S.A. ("TIGSA"), a wholly-owned subsidiary of the Company organized under the laws of Luxembourg, consummated consent solicitations and exchange offers related to certain series of debt issued under the Company's 1998 and 2003 indentures. In connection with the consent solicitations, holders of such debt received consent payments totaling $250 million, and we recorded a $222 million charge to other expense, net as a loss on extinguishment of debt. We also terminated our unsecured bridge loan facility entered into on November 27, 2007 in connection with the settlement of the Indenture Trustee Litigation and recorded a $36 million charge to other expense to write-off unamortized debt issuance costs.

This excerpt taken from the TYC 10-Q filed May 6, 2008.

Overview

        We remain committed to returning excess cash to shareholders. During the quarter and six months ended March 28, 2008, we repurchased 6.6 million and 12.0 million of our common shares for $245 million and $475 million, respectively, under the $1.0 billion share repurchase program approved by the Board of Directors in September 2007. Since March 28, 2008, we repurchased an additional 3.1 million common shares for $145 million under this program. During the quarter and six months ended March 28, 2008, we paid dividends of $74 million and $148 million, respectively, to shareholders of record.

        We are continuing to assess the strategic fit of our various businesses and are considering strategic alternatives for under-performing or non-strategic businesses including additional divestitures where businesses do not align with our long term vision. As part of these portfolio refinement efforts, we entered into agreements to sell our Infrastructure Services businesses and sold our Ancon Building

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Products business and our Nippon Dry-Chemical business. Additionally, we recently announced an agreement to acquire FirstService Security to strengthen ADT's system integration capabilities.

        We continue to focus on operational execution to drive earnings growth. To further improve operating efficiency, during the first quarter of 2007, we launched a restructuring program across all segments, including the corporate organization, which will streamline some of the businesses and reduce the operational footprint. We expect to incur aggregate charges related to the program of approximately $350 million to $400 million primarily through the end of 2008. Since the inception of this program, through the second quarter of 2008, the Company has incurred charges of $263 million related to this program. We believe this restructuring program will strengthen our competitive position over the long term.

        Additionally, we have made progress towards reducing our corporate expenses and we are well positioned to achieve our corporate expense run rate of $500 million for 2008.

This excerpt taken from the TYC 10-Q filed Feb 5, 2008.

Overview

        We remain committed to returning excess cash to shareholders. During the quarter ended December 28, 2007, we repurchased 5.5 million of our common shares for $229 million under the $1.0 billion share repurchase program approved by the Board of Directors in September 2007. During the quarter ended December 28, 2007, we paid dividends of $74 million to shareholders of record of Tyco International Ltd. on October 1, 2007.

        We are continuing to assess the strategic fit of our various businesses and are considering additional divestitures where businesses do not align with our long term vision. We will explore a number of strategic alternatives for under-performing or non-strategic businesses including possible divestiture. In December 2007, the Board of Directors approved for divestiture Nippon Dry-Chemical Co., Ltd. ("NDC") which was

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previously reported as part of Fire Protection Services and Safety Products. NDC had total net revenue of $177 million during 2007. NDC met the held for sale criteria in the first quarter of 2008 and has been included in discontinued operations in all periods presented.

        To further improve operating efficiency, during the first quarter of 2007, we launched a restructuring program across all segments, including the corporate organization, which will streamline some of the businesses and reduce the operational footprint. We expect to incur aggregate charges related to the program of approximately $350 million to $400 million through the end of 2008. Through the first quarter of 2008, the Company has incurred charges of $231 million related to this program. We believe this restructuring program will strengthen our competitive position over the long term.

This excerpt taken from the TYC 10-K filed Nov 27, 2007.

Overview

        Effective June 29, 2007, Tyco completed the spin-offs of Covidien and Tyco Electronics, formerly Healthcare and Electronics businesses, respectively, into separate, publicly traded companies (the "Separation") in the form of a distribution to Tyco shareholders. The distribution was made on June 29, 2007, to Tyco shareholders of record on June 18, 2007, the record date. Each Tyco shareholder received 0.25 of a common share of each of Covidien and Tyco Electronics for each Tyco common

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share held on the record date. Tyco shareholders received cash in lieu of fractional shares for amounts of less than one Covidien or Tyco Electronics common share. The distribution was structured to be tax-free to Tyco shareholders except to the extent of cash received in lieu of fractional shares. As a result of the distribution, the operations of Tyco's former Healthcare and Electronics businesses are now classified as discontinued operations in all periods presented.

        Additionally, on the distribution date, the Company, as approved by its Board of Directors, effected a reverse stock split of Tyco's common shares, at a split ratio of one for four. Shareholder approval for the reverse stock split was obtained at the March 8, 2007 Special General Meeting of Shareholders. Share and per share data for all periods presented have been adjusted to reflect the reverse stock split.

        We have and will continue to incur separation costs related to debt refinancing, tax restructuring, professional services and employee-related costs. We currently estimate that the total income statement charges will be approximately $1.4 billion, after-tax, much of which will be reflected as discontinued operations. During 2007 and 2006, the Company incurred pre-tax costs related to the Separation, including the $647 million loss on early extinguishment of debt in 2007, of $1,083 million and $169 million, respectively. Of this amount, $105 million and $49 million is included in separation costs, $259 million and $0 million related to loss on early extinguishment of debt is included in other expense, net and $719 million and $120 million is included in discontinued operations, respectively. Most of the remaining charges are expected to be incurred during the first six months of fiscal 2008.

        Additionally, 2007 includes tax charges related to the Separation primarily for the write-off of deferred tax assets that will no longer be realizable of $183 million, of which $95 million is included in income taxes and $88 million is included in discontinued operations.

        On April 27, 2007, in connection with the Separation, Tyco and certain of its subsidiaries that are issuers of its corporate debt commenced tender offers to purchase for cash substantially all of its outstanding U.S. dollar denominated public debt. Additionally, on April 30, 2007, Tyco International Group S.A., a wholly-owned subsidiary of the Company ("TIGSA"), commenced tender offers to purchase for cash all of its outstanding Euro and Pound Sterling denominated public debt. In connection with the debt tender offers, Tyco incurred a pre-tax charge for the early extinguishment of debt of approximately $647 million, for which no tax benefit is available.

        In connection with the Separation, during the third quarter of 2007 we reorganized to a new management and segment reporting structure. As part of these organizational changes, we assessed new reporting units, assigned goodwill to the new reporting units and tested goodwill for impairment. As a result, we recognized a goodwill impairment of $46 million in 2007 in the ADT Worldwide segment.

        We remain committed to returning excess cash to shareholders. In September 2007, Tyco's Board of Directors approved a new $1.0 billion share repurchase program under which, we repurchased 1.3 million of our common shares for $56 million. During 2007 we also completed the $2.0 billion share repurchase program approved by the Board of Directors in May 2006. Additionally, during 2006 we completed the $1.5 billion share repurchase program approved by the Board of Directors in July of 2005. During 2007, we paid dividends of $791 million to shareholders. On September 13, 2007 Tyco's Board of Directors approved a quarterly dividend on the Company's common shares of $0.15 per share payable on November 1, 2007 to shareholders of record of Tyco International Ltd. post Separation on October 1, 2007.

        During 2007, we sold Aquas Industriales de Jose, C.A. ("AIJ"), a joint venture that was majority owned by Infrastructure Services, for $42 million in net cash proceeds and a pre-tax gain of $19 million was recorded. AIJ met the held for sale and discontinued operations criteria and has been included in discontinued operations in all periods presented.

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        We are continuing to assess the strategic fit of our various businesses and are considering additional divestitures where businesses do not align with our long term vision. Tyco will explore a number of strategic alternatives for under-performing or non-strategic businesses including possible divestiture. In July 2007, the Board of Directors approved for divestiture Infrastructure Services which was previously reported as part of Corporate and Other. Infrastructure Services had total net revenue of $1.3 billion and operating income of $53 million in 2007. Infrastructure Services met the held for sale criteria in the fourth quarter of 2007 and has been included in discontinued operations in all periods presented.

        To further improve operating efficiency, during the first quarter of 2007, we launched a restructuring program across all segments, including the corporate organization, which will streamline some of the businesses and reduce the operational footprint. We expect to incur charges related to the program of approximately $350 million to $400 million through the end of 2008. During 2007, we incurred charges of $204 million, of which $7 million was recorded in cost of sales, and utilized cash of $70 million related to this program. We believe this restructuring program will strengthen our competitive position over the long term.

This excerpt taken from the TYC 10-Q filed Aug 9, 2007.

Overview

        Effective June 29, 2007, Tyco completed the spin-offs of Covidien and Tyco Electronics, formerly Healthcare and Electronics businesses, respectively, into separate, publicly traded companies (the "Separation") in the form of a distribution to Tyco shareholders. The distribution was made on June 29, 2007, to Tyco shareholders of record on June 18, 2007, the record date. Each Tyco shareholder received 0.25 of a common share of each of Covidien and Tyco Electronics for each Tyco common share held on the record date. Tyco shareholders received cash in lieu of fractional shares for amounts of less than one Covidien or Tyco Electronics common share. The distribution was structured to be tax-free to Tyco shareholders except to the extent of cash received in lieu of fractional shares. As a result of the distribution, the operations of Tyco's former Healthcare and Electronics businesses are now classified as discontinued operations in all periods presented.

        Additionally, on the distribution date, the Company, as approved by its Board of Directors, effected a reverse stock split of Tyco's common shares, at a split ratio of one for four. Shareholder approval for the reverse stock split was obtained at the March 8, 2007 Special General Meeting of Shareholders. Share and per share data for all periods presented have been adjusted to reflect the reverse stock split.

        We have and will continue to incur separation costs related to debt refinancing, tax restructuring, professional services and employee-related costs. We currently estimate that the total income statement charges will be approximately $1.4 billion, after-tax, much of which will be reflected as discontinued operations. During the quarters ended June 29, 2007 and June 30, 2006, the Company incurred pre-tax costs related to the Separation, including the $647 million loss on early extinguishment of debt in 2007, of $830 million and $56 million, respectively. Of this amount, $28 million and $19 million is included in separation costs, $259 million and $0 million related to loss on early extinguishment of debt is included in other expense, net and $543 million and $37 million in included in discontinued operations, respectively. During the nine months ended June 29, 2007 and June 30, 2006, the Company incurred pre-tax costs related to the Separation, including the $647 million loss on early extinguishment of debt in 2007, of $1,021 million and $89 million, respectively. Of this amount, $85 million and $32 million is included in separation costs, $259 million and $0 million related to loss on early extinguishment of debt is included in other expense, net and $677 million and $57 million in included in discontinued operations, respectively. Most of the remaining charges are expected to be incurred over the next six months.

        Additionally, the quarter ended June 29, 2007 includes tax charges related to the Separation primarily for the write-off of deferred tax assets that will no longer be realizable of $138 million, of which $56 million is included in income taxes and $82 million is included in discontinued operations. The nine months ended June 29, 2007 includes tax charges of $173 million, of which $85 million is included in income taxes and $88 million is included in discontinued operations.

        On April 27, 2007, in connection with the Separation, Tyco and certain of its subsidiaries that are issuers of its corporate debt commenced tender offers to purchase for cash substantially all of its outstanding U.S. dollar denominated public debt, aggregating approximately $6.6 billion. Tyco received acceptance notices for approximately $2.1 billion, or 36% of its outstanding non-convertible U.S. debt and approximately $726 million or 97% of its outstanding convertible U.S. debt. Debt which was not tendered in an amount of approximately $3.8 billion remains with Tyco.

        Additionally, on April 30, 2007, Tyco International Group S.A., a wholly-owned subsidiary of the Company ("TIGSA"), commenced tender offers to purchase for cash all of its outstanding Euro and Pound Sterling denominated public debt, aggregating the equivalent of approximately $1.9 billion. Tyco received acceptance notices for approximately $1.5 billion, or 80% of this debt, and the remainder was repurchased pursuant to an optional redemption.

        In connection with the debt tender offers, Tyco incurred a pre-tax charge for the early extinguishment of debt of approximately $647 million, for which no tax benefit is available. The charge

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consists primarily of premium paid and the write-off of unamortized debt issuance costs and discounts, of which $388 million is included in discontinued operations.

        In connection with the Separation, during the third quarter of 2007 we reorganized to a new management and segment reporting structure. As part of these organizational changes, we assessed new reporting units, assigned goodwill to the new reporting units and tested goodwill for impairment. As a result, we recognized a pre-tax goodwill impairment of $46 million in the third quarter of 2007 in the ADT Worldwide segment.

        We remain committed to returning excess cash to shareholders. During the quarter ended December 29, 2006, we repurchased 5 million of our common shares for $659 million completing the $2.0 billion share repurchase program approved by the Board of Directors in May 2006. In connection with the Separation, all common shares held by the Company were effectively retired during the third quarter of 2007. During the quarter and nine months ended June 29, 2007, we paid dividends of $396 million and $791 million, respectively, to shareholders.

        During the quarter ended December 29, 2006, we sold AIJ, a joint venture that was majority owned by our Infrastructure Services business, for $42 million in net cash proceeds and a pre-tax gain of $19 million was recorded. The AIJ business met the held for sale and discontinued operations criteria and has been included in discontinued operations in all periods presented.

        We are continuing to assess the strategic fit of our various businesses and are considering additional divestitures where businesses do not align with our long term vision. Tyco will explore a number of strategic alternatives for under-performing or non-strategic businesses including possible divestiture. In July 2007, the Board of Directors approved for divestiture our Infrastructure Services business which is part of Corporate and Other. The Infrastructure Services business had total net revenue of $1.2 billion and operating income of $55 million in 2006.

        To further improve operating efficiency, during the first quarter of 2007, we launched a restructuring program across the segments including the corporate organization which will streamline some of the businesses and reduce the operational footprint. We expect to incur charges related to the program of approximately $350 million to $400 million through the end of 2008. During the quarter and nine months ended June 29, 2007, we incurred charges of $49 million and $162 million, respectively, of which $2 million and $3 million, respectively, was recorded in cost of sales, and utilized cash of $13 million and $24 million, respectively, related to this program. We believe this restructuring program will strengthen our competitive position over the long term.

This excerpt taken from the TYC 10-Q filed May 8, 2007.

Overview

        As previously reported, on January 13, 2006, the Company announced that its Board of Directors approved a plan to separate the Company into three separate, publicly traded companies—Tyco Healthcare, one of the world's leading diversified healthcare companies; Tyco Electronics, the world's largest passive electronic components manufacturer; and a combination of Tyco Fire and Security and Engineered Products and Services, a global business with leading positions in residential and commercial security, fire protection, and industrial products and services (the "Proposed Separation").

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After thorough reviews of strategic options with our Board of Directors, we believe that this strategy is the best way to position our market-leading companies for sustained growth and value creation.

        Following the Proposed Separation, Tyco's shareholders will own 100% of the equity in all three companies through tax-free stock dividends. Additionally, we will, if approved by our Board of Directors, execute a reverse share split, and as a result, four Tyco shares will be converted into one share. Shareholder approval for the reverse share split was obtained at the March 8, 2007 Special General Meeting of Shareholders.

        Each of the three companies will have its own independent Board of Directors and strong corporate governance standards.

        We expect to incur separation costs related to debt refinancing, tax restructuring, professional services and employee-related costs. We currently estimate that the income statement charges will be at the high end of the previously disclosed range of $1.2 billion to $1.6 billion, after-tax. The total charges to complete the Proposed Separation will be influenced by the manner in which and the conditions under which we execute the tax restructuring and debt refinancing transactions. During the quarters ended March 30, 2007 and March 31, 2006, we incurred pre-tax costs related to the Proposed Separation of $106 million and $25 million, respectively. During the six months ended March 30, 2007 and March 31, 2006, we incurred pre-tax costs related to the Proposed Separation of $191 million and $33 million, respectively. Most of the remaining charges are expected to be incurred before completing the Proposed Separation.

        Consummation of the Proposed Separation is subject to certain conditions, including final approval by the Tyco Board of Directors, receipt of certain tax rulings, necessary opinions of counsel, the effectiveness of Registration Statements filed with the Securities and Exchange Commission ("SEC") and the completion of any necessary debt refinancings. Approval by the Company's shareholders is not required as a condition to the consummation of the Proposed Separation. Tyco has received an initial private letter ruling from the Internal Revenue Service ("IRS") and an opinion from outside counsel regarding the U.S. federal income tax consequences of the Proposed Separation noting it will qualify for favorable tax treatment. On January 18, 2007, Tyco filed initial Registration Statements with the SEC to register the equity of Tyco Healthcare and Tyco Electronics. In April 2007, amended Registration Statements were filed. The Company expects the Proposed Separation to occur in the second calendar quarter of 2007 subject to the conditions described above. Upon separation, Tyco Healthcare will change its name to Covidien Ltd.

        At or shortly before the completion of the Proposed Separation, we will reorganize to a new management and segment reporting structure. As part of these planned organizational changes, we will assess new reporting units and perform valuations to determine assignment of goodwill to the new reporting units based on relative fair values. We will also test the recoverability of goodwill. As such, we estimate that based on preliminary valuations and assumptions we may incur a pre-tax charge of approximately $100 million for the estimated amount of goodwill that we anticipate may be impaired as a result of the planned reorganization to a new management and segment reporting structure. The assessment relied on a number of preliminary assumptions that will be revised to reflect market conditions at the time of the final assessment. At the time of the organizational changes when these assessments actually occur, a charge, if any, could be materially different than the estimate provided herein.

        We are focused on growing profitability within each of these companies before and after the Proposed Separation, so that each may be well positioned for long-term growth as independent entities. Following the Proposed Separation, we expect that all three companies will be dividend-paying companies. As we prepare for the Proposed Separation, we remain committed to returning excess cash to shareholders. During the quarter ended December 29, 2006, we repurchased 22 million of our common shares for $659 million completing the $2.0 billion share repurchase program approved by the

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Board of Directors in May 2006. During the quarter and six months ended March 31, 2007, we paid dividends of $196 million and $395 million, respectively, to shareholders.

        During the quarter ended December 29, 2006, a subsidiary of the Company exercised its option to buy five cable laying sea vessels that were previously included under an off-balance sheet leasing arrangement for $280 million. Additionally, during the quarter ended December 29, 2006, we received $38 million related to restitution owed by Mark H. Swartz, former Chief Financial Officer and during the quarter ended March 30, 2007, we received the remaining $98 million held in escrow related to the restitution owed by L. Dennis Kozlowski, former Chairman and Chief Executive Officer.

        During the quarter ended December 29, 2006, we completed the sale of our Printed Circuit Group ("PCG"), a Tyco Electronics business and leading manufacturer of high-technology printed circuit boards for the military, aerospace and commercial markets, for $231 million in net cash proceeds and recorded a pre-tax gain on sale of $45 million. Additionally, we collected the $30 million receivable due from the purchaser of our Plastics, Adhesives and Ludlow Coated Products businesses.

        During the quarter ended December 29, 2006, we also consummated the sale of the Aguas Industriales de Jose, C.A. ("AIJ"), a majority owned Engineered Products and Services segment joint venture in Venezuela, for $42 million in net cash proceeds and a pre-tax gain of $19 million was recorded.

        The PCG and AIJ businesses met the held for sale and discontinued operations criteria and have been included in discontinued operations in all periods presented. Details related to the Company's divestiture program and the related discontinued operations are discussed in "Discontinued Operations and Divestitures."

        We are continuing to assess the strategic fit of our various businesses and are considering additional divestitures where businesses do not align with our long term vision. Tyco, Tyco Electronics and Tyco Healthcare will explore a number of strategic alternatives for under-performing or non-strategic businesses including possible divestiture. At the conclusion of this process, management will present its recommendations to the Board of Directors for their review and approval. This includes our Infrastructure Services business which is part of our Engineered Products and Services segment. The Infrastructure Services business had total net revenue of $1.2 billion and operating income of $55 million in 2006. For Tyco Electronics, this includes the Power Systems business. The Power Systems business had total net revenue of approximately $500 million and operating losses of approximately $30 million in 2006. Should the outcome of the strategic review process result in approval to divest the Power Systems business, there could be a resulting pre-tax impairment charge of up to $450 million.

        To further improve operating efficiency, during the first quarter of 2007, we launched a restructuring program across all segments including the corporate organization which will streamline some of the businesses and reduce the operational footprint. We expect to incur charges of approximately $600 million over the next two years, of which $400 million is expected to be incurred in 2007. We expect that the total cash expenditures for this program will be approximately $450 million, of which $250 million is expected in 2007. During the quarter and six months ended March 30, 2007, we incurred charges of $66 million and $148 million, respectively, and utilized cash of $17 million and $19 million, respectively, related to this program. We believe this restructuring program will strengthen our competitive position over the long term.

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This excerpt taken from the TYC 10-Q filed Apr 20, 2007.

Overview

        As previously reported in our periodic filings, on January 13, 2006, the Company announced that its Board of Directors approved a plan to separate the Company into three separate, publicly traded companies—Tyco Healthcare, one of the world's leading diversified healthcare companies; Tyco Electronics, the world's largest passive electronic components manufacturer; and a combination of Tyco Fire and Security and Engineered Products and Services, a global business with leading positions in residential and commercial security, fire protection, and industrial products and services (the "Proposed Separation"). After thorough reviews of strategic options with our Board of Directors, we believe that this strategy is the best way to position our market-leading companies for sustained growth and value creation.

        Following the Proposed Separation, Tyco's shareholders will own 100% of the equity in all three companies through tax-free stock dividends. Additionally, we anticipate, subject to shareholder approval, that on the date of the distribution, we will execute a reverse share split. As a result, four Tyco International shares will be converted into one share.

        Each of the three companies will have its own independent Board of Directors and strong corporate governance standards.

        We expect to incur separation costs related to debt refinancing, tax restructuring, professional services and employee-related costs. We currently estimate that the income statement charges will be at the high end of the previously disclosed range of $1.2 billion to $1.6 billion, after-tax. The total charges to complete the Proposed Separation will be influenced by the manner in which and the conditions under which we execute the tax restructuring and debt refinancing transactions. During the quarter ended December 29, 2006, we incurred separation related charges of $85 million and during the twelve months ended September 29, 2006, we incurred separation related charges of $169 million. Most of the remaining charges are expected to be incurred before completing the Proposed Separation.

        Consummation of the Proposed Separation is subject to certain conditions, including final approval by the Tyco Board of Directors, receipt of certain tax rulings, necessary opinions of counsel, the effectiveness of Registration Statements filed with the Securities and Exchange Commission ("SEC") and the completion of any necessary debt refinancings. Approval by the Company's shareholders is not required as a condition to the consummation of the Proposed Separation. Tyco has received an initial private letter ruling from the Internal Revenue Service ("IRS") and an opinion from outside counsel regarding the U.S. federal income tax consequences of the Proposed Separation noting it will qualify for favorable tax treatment. On January 18, 2007, Tyco filed initial Registration Statements with the SEC to register the equity of Tyco Healthcare and Tyco Electronics. The Company expects the

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Proposed Separation to occur in the second calendar quarter of 2007. Upon separation, Tyco Healthcare will change its name to Covidien Ltd.

        At or shortly before the completion of the Proposed Separation, we will reorganize to a new management and segment reporting structure. As part of these planned organizational changes, we will assess new reporting units and perform valuations to determine assignment of goodwill to the new reporting units based on relative fair values. We will also test the recoverability of goodwill. As such, we estimate that based on preliminary valuations and assumptions we may incur a pre-tax charge of approximately $100 million for the estimated amount of goodwill that we anticipate may be impaired as a result of the planned reorganization to a new management and segment reporting structure. The assessment relied on a number of preliminary assumptions that will be revised to reflect market conditions at the time of the final assessment. At the time of the organizational changes when these assessments actually occur, a charge, if any, could be materially different than the estimate provided herein.

        We are focused on growing profitability within each of these companies before and after the Proposed Separation, so that each may be well positioned for long-term growth as independent entities. Following the Proposed Separation, we expect that all three companies will be dividend-paying companies. As we prepare for the Proposed Separation, we remain committed to returning excess cash to shareholders. During the quarter ended December 29, 2006, we repurchased 22 million of our common shares for $659 million completing the $2.0 billion share repurchase program approved by the Board of Directors in May 2006 and paid dividends of $199 million to shareholders.

        During the quarter ended December 29, 2006, a subsidiary of the Company exercised its option to buy five cable laying sea vessels that were previously included under an off-balance sheet leasing arrangement for $280 million. Additionally, during the quarter ended December 29, 2006, we received $38 million related to restitution owed by Mark H. Swartz, former Chief Financial Officer and Director, and in January 2007, we received the remaining $98 million held in escrow related to the restitution owed by L. Dennis Kozlowski, former Chairman and Chief Executive Officer.

        During the quarter ended December 29, 2006, we completed the sale of our Printed Circuit Group ("PCG"), a Tyco Electronics business and leading manufacturer of high-technology printed circuit boards for the military, aerospace and commercial markets, for $231 million in net cash proceeds and recorded a pre-tax gain on sale of $45 million. Additionally, we collected the $30 million receivable due from the purchaser of our Plastics, Adhesives and Ludlow Coated Products businesses.

        We also consummated the sale of the Aguas Industriales de Jose, C.A. ("AIJ"), a majority owned Engineered Products and Services segment joint venture in Venezuela, for $42 million in net cash proceeds and a pre-tax gain of $19 million was recorded.

        The PCG and AIJ business met the held for sale and discontinued operations criteria and has been included in discontinued operations in all periods presented. Details related to the Company's divestiture program and the related discontinued operations are discussed in "Discontinued Operations and Divestitures."

        We are continuing to assess the strategic fit of our various businesses and are considering additional divestitures where businesses do not align with our long term vision. Following the Proposed Separation, we will explore a number of strategic alternatives for our Infrastructure Services business, within our Engineered Products and Services segment, which will include the possible divestiture of the business. At the conclusion of this process, management will present its recommendations to the Board of Directors for their review and approval. The Infrastructure Services business had total net revenue of $1.3 billion and operating income of $66 million in 2006.

        To further improve operating efficiency, during the first quarter of 2007, we launched a restructuring program across all segments including the corporate organization which will streamline

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some of the businesses and reduce the operational footprint. We expect to incur charges of approximately $600 million over the next two years, of which $500 million is expected to be incurred in 2007. We expect that the total cash expenditures for this program will be approximately $450 million, of which $250 million is expected in 2007. During the quarter ended December 29, 2006, we incurred charges of $82 million and utilized cash of $2 million related to this program. We believe this restructuring program will strengthen our competitive position over the long term.

This excerpt taken from the TYC 10-Q filed Feb 6, 2007.

Overview

        As previously reported in our periodic filings, on January 13, 2006, the Company announced that its Board of Directors approved a plan to separate the Company into three separate, publicly traded companies—Tyco Healthcare, one of the world's leading diversified healthcare companies; Tyco Electronics, the world's largest passive electronic components manufacturer; and a combination of Tyco Fire and Security and Engineered Products and Services, a global business with leading positions in residential and commercial security, fire protection, and industrial products and services (the "Proposed Separation"). After thorough reviews of strategic options with our Board of Directors, we believe that this strategy is the best way to position our market-leading companies for sustained growth and value creation.

        Following the Proposed Separation, Tyco's shareholders will own 100% of the equity in all three companies through tax-free stock dividends. Additionally, we anticipate, subject to shareholder approval, that on the date of the distribution, we will execute a reverse share split. As a result, four Tyco International shares will be converted into one share.

        Each of the three companies will have its own independent Board of Directors and strong corporate governance standards.

32



        We expect to incur separation costs related to debt refinancing, tax restructuring, professional services and employee-related costs. We currently estimate that the income statement charges will be $1.2 billion to $1.6 billion, after-tax. The total charges to complete the Proposed Separation will be influenced by the manner in which and the conditions under which we execute the tax restructuring and debt refinancing transactions. During the quarter ended December 29, 2006, we incurred separation related charges of $85 million and during the twelve months ended September 29, 2006, we incurred separation related charges of $169 million. Most of the remaining charges are expected to be incurred before completing the Proposed Separation.

        Consummation of the Proposed Separation is subject to certain conditions, including final approval by the Tyco Board of Directors, receipt of certain tax rulings, necessary opinions of counsel, the effectiveness of Registration Statements filed with the Securities and Exchange Commission ("SEC") and the completion of any necessary debt refinancings. Approval by the Company's shareholders is not required as a condition to the consummation of the Proposed Separation. Tyco has received an initial private letter ruling from the Internal Revenue Service ("IRS") and an opinion from outside counsel regarding the U.S. federal income tax consequences of the Proposed Separation noting it will qualify for favorable tax treatment. On January 18, 2007, Tyco filed initial Registration Statements with the SEC to register the equity of Tyco Healthcare and Tyco Electronics. The Company expects the Proposed Separation to occur early in the second calendar quarter of 2007. Upon separation, Tyco Healthcare will change its name to Covidien Ltd.

        At or shortly before the completion of the Proposed Separation, we will reorganize to a new management and segment reporting structure. As part of these planned organizational changes, we will assess new reporting units and perform valuations to determine assignment of goodwill to the new reporting units based on relative fair values. We will also test the recoverability of goodwill. As such, we estimate that based on preliminary valuations and assumptions we may incur a pre-tax charge of approximately $100 million for the estimated amount of goodwill that we anticipate may be impaired as a result of the planned reorganization to a new management and segment reporting structure. The assessment relied on a number of preliminary assumptions that will be revised to reflect market conditions at the time of the final assessment. At the time of the organizational changes when these assessments actually occur, a charge, if any, could be materially different than the estimate provided herein.

        We are focused on growing profitability within each of these companies before and after the Proposed Separation, so that each may be well positioned for long-term growth as independent entities. Following the Proposed Separation, we expect that all three companies will be dividend-paying companies. As we prepare for the Proposed Separation, we remain committed to returning excess cash to shareholders. During the quarter ended December 29, 2006, we repurchased 22 million of our common shares for $659 million completing the $2.0 billion share repurchase program approved by the Board of Directors in May 2006 and paid dividends of $199 million to shareholders.

        During the quarter ended December 29, 2006, a subsidiary of the Company exercised its option to buy five cable laying sea vessels that were previously included under an off-balance sheet leasing arrangement for $280 million. Additionally, during the quarter ended December 29, 2006, we received $38 million related to restitution owed by Mark H. Swartz, former Chief Financial Officer and Director, and in January 2007, we received the remaining $98 million held in escrow related to the restitution owed by L. Dennis Kozlowski, former Chairman and Chief Executive Officer.

        During the quarter ended December 29, 2006, we completed the sale of our Printed Circuit Group ("PCG"), a Tyco Electronics business and leading manufacturer of high-technology printed circuit boards for the military, aerospace and commercial markets, for $231 million in net cash proceeds and recorded a pre-tax gain on sale of $45 million. Additionally, we collected the $30 million receivable due from the purchaser of our Plastics, Adhesives and Ludlow Coated Products businesses.

33



        We also consummated the sale of the Aguas Industriales de Jose, C.A. ("AIJ"), a majority owned Engineered Products and Services segment joint venture in Venezuela, for $42 million in net cash proceeds and a pre-tax gain of $19 million was recorded.

        The PCG and AIJ business met the held for sale and discontinued operations criteria and has been included in discontinued operations in all periods presented. Details related to the Company's divestiture program and the related discontinued operations are discussed in "Discontinued Operations and Divestitures."

        We are continuing to assess the strategic fit of our various businesses and are considering additional divestitures where businesses do not align with our long term vision. Following the Proposed Separation, we will explore a number of strategic alternatives for our Infrastructure Services business, within our Engineered Products and Services segment, which will include the possible divestiture of the business. At the conclusion of this process, management will present its recommendations to the Board of Directors for their review and approval. The Infrastructure Services business had total net revenue of $1.3 billion and operating income of $66 million in 2006.

        To further improve operating efficiency, during the first quarter of 2007, we launched a restructuring program across all segments including the corporate organization which will streamline some of the businesses and reduce the operational footprint. We expect to incur charges of approximately $600 million over the next two years, of which $500 million is expected to be incurred in 2007. We expect that the total cash expenditures for this program will be approximately $450 million, of which $250 million is expected in 2007. During the quarter ended December 29, 2006, we incurred charges of $82 million and utilized cash of $2 million related to this program. We believe this restructuring program will strengthen our competitive position over the long term.

This excerpt taken from the TYC 10-K filed Dec 11, 2006.

Overview

        As previously reported in our periodic filings, on January 13, 2006, the Company announced that its Board of Directors approved a plan to separate the Company into three separate, publicly traded companies—Tyco Healthcare, one of the world's leading diversified healthcare companies; Tyco Electronics, the world's largest passive electronic components manufacturer; and a combination of Tyco Fire and Security and Engineered Products and Services, a global business with leading positions in residential and commercial security, fire protection, and industrial products and services (the "Proposed Separation"). After thorough reviews of strategic options with our Board of Directors, we believe that this strategy is the best way to position our market-leading companies for sustained growth and value creation.

        Following the Proposed Separation, Tyco's shareholders will own 100% of the equity in all three companies through tax-free stock dividends. Each company will have its own independent Board of

41



Directors and strong corporate governance standards. We expect to file Registration Statements in connection with the Proposed Separation during the second quarter of 2007.

        In connection with the Proposed Separation, the Company continues to estimate that the net economic cost to complete the transaction is expected to approximate $1.0 billion, largely for tax restructuring, debt refinancing, professional services and employee-related costs. Depending on prevailing market conditions through the date of the Proposed Separation, the Company anticipates that the corresponding income statement charges would be larger than net economic cost to complete the Proposed Separation. The difference between the income statement charges and the estimated net economic cost is expected to result from costs to retire, refinance or reassign debt, as well as non-cash charges. During 2006, the Company incurred $169 million of costs related to the Proposed Separation primarily related to legal, accounting and consulting work associated with executing the transaction.

        Consummation of the Proposed Separation is subject to certain conditions, including final approval by the Tyco Board of Directors, receipt of certain tax rulings, necessary opinions of counsel, the filing and effectiveness of registration statements with the Securities and Exchange Commission ("SEC") and the completion of any necessary debt refinancings. Approval by the Company's shareholders is not required as a condition to the consummation of the Proposed Separation. Tyco has received an initial private letter ruling from the Internal Revenue Service ("IRS") regarding the U.S. federal income tax consequences of the Proposed Separation noting it will qualify for favorable tax treatment.

        We are focused on growing profitability within each of these companies before and after the Proposed Separation, so that each may be well positioned for long-term growth as independent entities. Following the Proposed Separation, we expect that all three companies will be dividend-paying companies. As we prepare for the Proposed Separation, we remain committed to returning excess cash to shareholders. During 2006, we repurchased 95 million of our common shares for $2.5 billion under our share repurchase programs. We completed the $1.5 billion share repurchase program previously approved by the Board of Directors with the repurchase of 45 million of our common shares for $1.2 billion and we repurchased an additional 50 million of our common shares for $1.3 billion under the new $2.0 billion share repurchase program approved by the Board of Directors in May 2006. We have $659 million remaining on the $2.0 billion share repurchase program which we expect to complete prior to the Proposed Separation.

        During 2006, holders of Tyco International Group S.A., a wholly-owned subsidiary of the Company organized under the laws of Luxembourg ("TIGSA") Series A 2.75% convertible senior debentures due 2018 with a 2008 put option converted $1.2 billion of these debentures into 54 million Tyco common shares and redeemed the remaining $1 million principal amount outstanding with cash. Additionally, we utilized $1.0 billion in cash for a scheduled repayment of public notes and terminated one of our synthetic lease facilities for a total cash payment of $203 million, reducing principal debt and minority interest by $191 million and $10 million, respectively. In October 2006, we exercised our right to buy five cable laying sea vessels that were previously included under an off-balance sheet leasing arrangement for $280 million.

        During 2006, we completed the sale of our Plastics and Adhesives segment. Our Plastics, Adhesives and Ludlow Coated Products businesses were sold for net proceeds of $882 million and the A&E Products Group was sold for net proceeds of $2 million. During 2006, the Company also recorded a $30 million receivable due from the purchaser of the Plastics, Adhesives and Ludlow Coated Products businesses based on the decline of average resin prices during fiscal year 2006, as contemplated in the definitive sale agreement. This amount is payable to Tyco no later than January 2007. Additionally, we entered into a definitive agreement to sell Printed Circuit Group ("PCG"), a Tyco Electronics business and leading manufacturer of high-technology printed circuit boards for the military, aerospace and commercial markets, for $226 million. This transaction was completed on October 27, 2006 and a gain on sale of approximately $45 million is expected. As such, the operations of our Plastics and Adhesives

42



segment and PCG business are reflected as discontinued operations in all periods presented. Details related to the Company's divestiture program and the related discontinued operations are discussed in "Discontinued Operations and Divestitures." We are continuing to assess the strategic fit of our various businesses and are considering additional divestitures where businesses do not align with our long term vision.

        To further improve operating efficiency, during the first quarter of 2007, we have launched a restructuring program across all segments including the corporate organization which will streamline some of the businesses and reduce our operational footprint. We expect to incur charges of approximately $600 million over the next two years, of which $500 million is expected to be incurred in 2007. We expect that the total cash expenditures for this program will be approximately $450 million, of which $250 million is expected in 2007. We believe this restructuring program will strengthen our competitive position over the long term.

This excerpt taken from the TYC 10-Q filed Aug 8, 2006.

Overview

        As previously reported in our periodic filings, on January 13, 2006, the Company announced that its Board of Directors approved a plan to separate the Company into three separate, publicly traded companies—Tyco Healthcare, one of the world's leading diversified healthcare companies; Tyco Electronics, the world's largest passive electronic components manufacturer; and a combination of Tyco Fire and Security and Engineered Products and Services, a global business with leading positions in residential and commercial security, fire protection, and industrial products and services (the "Proposed Separation"). After thorough reviews of strategic options with our Board of Directors, we believe that this strategy is the best way to position our market-leading companies for sustained growth and value creation.

        Following the Proposed Separation, Tyco's shareholders will own 100% of the equity in all three companies through tax-free stock dividends. Each company will have its own independent Board of Directors and strong corporate governance standards. Tyco expects to complete the Proposed Separation during the first quarter of calendar 2007.

        Consummation of the Proposed Separation is subject to certain conditions, including final approval by the Tyco Board of Directors, receipt of a tax opinion of counsel and the filing and effectiveness of registration statements with the Securities and Exchange Commission ("SEC") and the completion of

40



any necessary debt refinancings. Approval by the Company's shareholders is not required as a condition to the consummation of the Proposed Separation.

        As we prepare for the Proposed Separation, we remain committed to returning capital to shareholders. During the first nine months of 2006, we repurchased 71 million of our common shares for $1.9 billion under our share repurchase programs. We completed the $1.5 billion share repurchase program previously approved by the Board of Directors with the repurchase of 44.5 million of our common shares for $1.2 billion and we repurchased 26.5 million of our common shares for $715 million under the new $2.0 billion share repurchase program approved by the Board of Directors in May 2006. We will continue to use excess cash to repurchase shares over the balance of the year. Also, following the Proposed Separation, we expect that all three companies will be dividend-paying companies. We are also focused on growing profitability within each of these companies before and after the Proposed Separation, so that each may be well positioned for long-term growth as an independent entity.

        During the nine months ended June 30, 2006, we completed the sale of our Plastics and Adhesives segment. Our Plastics, Adhesives and Ludlow Coated Products businesses were sold for net proceeds of $882 million and the A&E Products Group was sold for $5 million in gross cash proceeds. Additionally, during the third quarter of 2006, the Company approved a plan to divest the Printed Circuit Group ("PCG") business, a component of the Electronics segment. The PCG business met the held for sale and discontinued operations criteria at June 30, 2006. As such, the operations of our Plastics and Adhesives segment and our PCG business are reflected as discontinued operations in all periods presented. Details related to the Company's divestiture program and the related discontinued operations are discussed in "Discontinued Operations and Divestitures."

        During the nine months ended June 30, 2006, TIGSA converted $1.2 billion of its Series A 2.75% convertible senior debentures due 2018 with a 2008 put option (the "2.75% convertible senior debentures") into 54.4 million Tyco common shares and redeemed the remaining $1 million principal amount outstanding with cash. Additionally, we utilized $1.0 billion in cash for scheduled repayments of public notes and repaid and terminated one of our synthetic lease facilities for a total cash payment of $226 million, reducing principal debt and minority interest by $214 million and $10 million, respectively.

        During the quarter ended June 30, 2006, TIGSA amended its $1.5 billion 3-year revolving bank credit facility to extend the maturity date from December 22, 2006 to December 21, 2007.

        The United States Internal Revenue Service ("IRS") continues to audit the years 1997 through 2000. In 2004, the Company submitted to the IRS proposed adjustments to its 1997 through 2000 U.S. federal income tax returns. During the second quarter of 2006, the IRS and the Company agreed to several of the proposed adjustments and also agreed to resolution of certain legacy tax matters. These adjustments did not have a material impact on the financial condition, results of operations or cash flows of the Company.

        The Company is in the process of preparing proposed amendments to prior period U.S. federal income tax returns for additional periods. The proposed amendments are not expected to have a material adverse impact on the financial condition, results of operations or cash flows of the Company.

41



This excerpt taken from the TYC 10-Q filed May 9, 2006.

Overview

        As previously reported in our periodic filings, on January 13, 2006, the Company announced that its Board of Directors approved a plan to separate the Company into three separate, publicly traded companies—Tyco Healthcare, one of the world's leading diversified healthcare companies; Tyco Electronics, the world's largest passive electronic components manufacturer; and a combination of Tyco Fire and Security and Engineered Products and Services, a global business with leading positions in residential and commercial security, fire protection, and industrial products and services (the "Proposed Separation"). After thorough reviews of strategic options with our Board of Directors, we believe that this strategy is the best way to position our market-leading companies for sustained growth and value creation.

        Following the Proposed Separation, Tyco's shareholders will own 100% of the equity in all three companies through tax-free stock dividends. Each company will have its own independent Board of Directors and strong corporate governance standards. Tyco expects to complete the Proposed Separation during the first quarter of calendar 2007.

39


        Consummation of the Proposed Separation is subject to certain conditions, including final approval by the Tyco Board of Directors, receipt of a tax opinion of counsel and the filing and effectiveness of registration statements with the Securities and Exchange Commission ("SEC") and the completion of any necessary debt refinancings. Approval by the Company's shareholders is not required as a condition to the consummation of the Proposed Separation.

        As we prepare for the Proposed Separation, we remain committed to returning capital to shareholders. During the first six months of 2006, we repurchased 30.0 million of our common shares for $809 million, which followed $300 million in share repurchases during 2005. In April 2006, we completed the $1.5 billion share repurchase program previously approved by the Board of Directors with the additional purchase of 14.5 million shares for $391 million. The Board of Directors has approved a new $2.0 billion share purchase program. We will continue to use excess cash to repurchase shares over the balance of the year. Also, following the Proposed Separation, we expect that all three companies will be dividend-paying companies. We are also focused on growing profitability within each of these companies before and after the Proposed Separation, so that each may be well positioned for long-term growth as independent entities.

        On February 16, 2006, we completed the sale of our Plastics, Adhesives and Ludlow Coated Products businesses, previously announced in 2005, for $975 million in gross cash proceeds. Estimated working capital and other adjustments resulted in net proceeds of $907 million. Settlement of the final working capital adjustment is expected prior to year end. As such, the operations of Plastics and Adhesives are reflected as discontinued operations in the accompanying consolidated financial statements up to the date of disposal. Details related to the Company's divestiture program and the related discontinued operations are discussed in "Discontinued Operations and Divestitures."

        On February 21, 2006, TIGSA delivered a notice of redemption to the holders of its Series A 2.75% convertible senior debentures due 2018 with a 2008 put option (the "2.75% convertible senior debentures"), exercising its right to redeem all such debentures at 101.1 percent of the principal amount outstanding plus accrued interest. The 2.75% convertible senior debentures were convertible into 43.892 Tyco common shares per $1,000 principal amount. Prior to March 8, 2006, the redemption date, $1.2 billion of the 2.75% convertible senior debentures were converted into 54.4 million Tyco common shares and on March 8, 2006, TIGSA redeemed the remaining $1 million principal amount outstanding with cash.

        During the three months ended March 31, 2006, we also repaid and terminated one of our synthetic lease facilities for a total cash payment of $226 million, reducing principal debt and minority interest by $214 million and $10 million, respectively.

        Additionally, during the three months ended March 31, 2006, we utilized $1.0 billion in cash for scheduled repayments of public notes.

        During the three months ended March 31, 2006, the United States Internal Revenue Service ("IRS") continued to audit the years 1997 through 2000. In 2004, the Company submitted to the IRS proposed adjustments to its 1997 through 2000 U.S. federal income tax returns. During the three months ended March 31, 2006, the IRS and the Company agreed to several of the proposed adjustments and also agreed to resolution of certain legacy tax matters. These adjustments did not have a material impact on the financial condition, results of operations or cash flows of the Company.

        The Company is in the process of preparing proposed amendments to prior period U.S. federal income tax returns for additional periods. The proposed amendments are not expected to have a material adverse impact on the financial condition, results of operations or cash flows of the Company.

40


This excerpt taken from the TYC 10-Q filed Feb 7, 2006.

Overview

On January 13, 2006, the Company announced that its Board of Directors approved a plan to separate the Company into three separate, publicly traded companies—Tyco Healthcare, one of the world’s leading diversified healthcare companies; Tyco Electronics, the world’s largest passive electronic components manufacturer; and a combination of Tyco Fire and Security and Engineered Products and Services, a global business with leading positions in residential and commercial security, fire protection and industrial products and services.

Following the proposed separation, Tyco’s shareholders will own 100% of the equity in all three companies through tax-free stock dividends. Each company will have its own independent Board of Directors and strong corporate governance standards. Tyco expects to complete the separation during the first quarter of calendar 2007.

Consummation of the proposed separation is subject to certain conditions, including final approval by the Tyco Board of Directors, receipt of a tax opinion of counsel and the filing and effectiveness of registration statements with the Securities and Exchange Commission (“SEC”). The separation is also subject to the completion of any necessary refinancings. Approval by the Company’s shareholders is not required.

33




After thorough reviews of strategic options with our Board of Directors, we believe that this strategy is the best way to position our market-leading companies for sustained growth and value creation.

We remain committed to returning capital to shareholders. During the first quarter of 2006, we repurchased 7.9 million of our common shares for $216 million, which followed $300 million in share repurchases during 2005. With respect to future share repurchases, we are committed to completing the $1.5 billion share repurchase program previously approved by the Board of Directors, and will assess the amount and pace of any additional share repurchases as we prepare for the proposed separation. Also, following the separation, we expect that all three companies will be dividend-paying companies.  We are also focused on growing profitability within each of these companies before and after the separation, so that each may be well positioned for long-term growth as independent entities.

Over the past several years, the Company has engaged in a series of restructuring programs through which we have made our operations more efficient, including exiting certain non-core businesses or business lines and streamlining general operations. The impact of these restructuring programs on the Company’s operations is discussed in “Operating Results” and “Segment Results.” In addition to these programs, during 2005 the Company committed to a plan to sell its Plastics and Adhesives segment. As such, the operations of our Plastics and Adhesives segment are reflected as discontinued operations in the accompanying consolidated financial statements. Prior year amounts have been reclassified to exclude the results of discontinued operations and to comparatively reflect changes in the Company’s segment reporting. Details related to the Company’s divestiture program and the related discontinued operations are discussed in “Discontinued Operations and Divestitures.”

This excerpt taken from the TYC 10-K filed Dec 9, 2005.

Overview

        Our business strategy focuses on enhancing internal growth and operational efficiency for existing Tyco businesses. We achieve this goal primarily through new product innovation, increased market share, and continued geographic expansion. We have implemented and will continue to implement additional Six Sigma initiatives across our business segments to achieve best-in-class operating practices.

        The Company has engaged in a series of restructuring programs since November 2003 through which we have made our operations more efficient, including exiting certain non-core businesses or business lines and streamlining general operations. The impact of these restructuring programs on the Company's operations is discussed in "Operating Results" and "Segment Results." Also, during the fourth quarter of 2005, the Company committed to a plan to sell its Plastics and Adhesives segment. As such, the operations of our Plastics and Adhesives segment are reflected as discontinued operations in the accompanying consolidated financial statements. Details related to the Company's divestiture program and the related discontinued operations are discussed in "Divestitures and Discontinued Operations." We are continuing to assess the strategic fit of our various businesses and are considering additional divestitures where businesses do not align with our long term vision.

        In 2005, we continued to utilize cash to fund internal growth, strengthen the balance sheet and return capital to shareholders. During 2005, we utilized $3.0 billion to repurchase our convertible debentures prior to their scheduled maturities. In total, these repurchases reduced our diluted share count by approximately 88.9 million shares on an annualized basis with the added benefit of reducing our debt and interest expense. In addition, we utilized $2.0 billion in cash for scheduled repayments of debentures. Also, in July 2005, Tyco's Board of Directors approved a $1.5 billion share repurchase

34



program. As of September 30, 2005, we have repurchased 10.5 million of our common shares for $300 million. In the two weeks following the end of the fourth quarter of 2005, we have repurchased an additional 7.9 million of our common shares for $216 million. As a result of this program, we anticipate spending a total of approximately $2 billion through the second quarter of 2006 for these repurchases.

        During the first quarter of 2005, we announced a substantial increase in our quarterly dividend from $0.0125 per share to $0.10 per share. As a result, dividend payments for 2005 increased to $628 million from $100 million in the comparable prior year period.

        References to Tyco are to the Company's continuing operations. Prior year amounts have been reclassified to exclude the results of discontinued operations and to comparatively reflect changes in the Company's segment reporting. The operating results of the TGN are presented within Corporate and Other through the date of its disposal in the third quarter of 2005. Information for 2003 has been reclassified to reflect the transfer of Tyco's Precision Interconnect business from Healthcare to Electronics in 2004.

This excerpt taken from the TYC 10-Q filed May 11, 2005.

Overview

        The following table details net revenue and net income for the quarters and six months ended April 1, 2005 and March 31, 2004 ($ in millions):

 
  Quarters Ended
  Six Months Ended
 
 
  April 1,
2005

  March 31,
2004

  April 1,
2005

  March 31,
2004

 
Revenue from product sales   $ 8,528   $ 7,797   $ 16,646   $ 15,454  
Service revenue     1,928     2,024     3,875     4,032  
   
 
 
 
 
Net revenue   $ 10,456   $ 9,821   $ 20,521   $ 19,486  
   
 
 
 
 
Operating income   $ 1,341   $ 1,258   $ 2,737   $ 2,497  
Interest income     31     14     68     40  
Interest expense     (209 )   (226 )   (427 )   (491 )
Other (expense) income, net     (575 )   6     (736 )   (2 )
   
 
 
 
 
Income from continuing operations before income taxes and minority interest     588     1,052     1,642     2,044  
Income taxes     (366 )   (259 )   (676 )   (527 )
Minority interest     (1 )   (5 )   (4 )   (8 )
   
 
 
 
 
Income from continuing operations     221     788     962     1,509  
Loss from discontinued operations, net of income taxes     (2 )   (5 )   (5 )   (7 )
Loss on sale of discontinued operations, net of income taxes     (27 )       (56 )    
   
 
 
 
 
Net income   $ 192   $ 783   $ 901   $ 1,502  
   
 
 
 
 

        Net revenue increased $0.6 billion, or 6.5%, for the second quarter and $1.0 billion, or 5.3%, for the first half of 2005 as compared to the same periods last year. Net revenue increased in all segments for both the quarter and year to date. Foreign currency exchange rates favorably effected each period by $217 million and $561 million, respectively.

        Operating income increased $83 million, or 6.6%, for the second quarter while operating margin remained at 12.8% as compared to the same period last year. Operating income increased $240 million, or 9.6%, for the first half of 2005 while operating margins increased 0.5 percentage points to 13.3%. Both current year periods were unfavorably impacted by asset impairment charges of $202 million and an estimated SEC enforcement action charge of $50 million. Foreign currency exchange rates favorably effected each period by $27 million and $88 million, respectively.

        We continued to utilize cash to fund internal growth and strengthen the balance sheet, as well as return capital to shareholders. During the first six months of 2005, we utilized $1.9 billion, including a $0.7 billion cash premium, to repurchase $1.2 billion aggregate principal amount of our convertible debentures prior to their scheduled maturities. These repurchases reduced our diluted share count by approximately 53 million shares on an annualized basis with the added benefit of reducing our debt and interest expense. In addition, we utilized $1.0 billion in cash for scheduled repayments of debentures during the first half of 2005.

        During the first quarter of 2005, we also announced a substantial increase in our quarterly dividend from $0.0125 cents per share to $0.10 cents per share. As a result, dividend payments for the six months ended April 1, 2005 increased to $225 million from $50 million in the comparable prior year period.

        In May 2005, we announced our intent to explore the divestiture of our Plastics and Adhesives business segment. This action is a continuation of our ongoing portfolio refinement. We will continue

33



to assess the strategic fit of our various businesses and will consider additional divestitures where businesses do not align with our long-term vision.

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